“Golden Visa” UK: news about the closure of the program

The Supreme Court has ruled in favor of the Home Office

 The UK Supreme Court has put an end to a business model that provided funds to Tier 1 applicants on the condition that they invest in a company controlled by the same individuals.

When the UK Home Office rejected applications for renewal and indefinite leave to remain for two investors in the UK's Tier 1 Investor Visa program due to the applicants' inability to meet the program's investment requirements, the investors took the Home Office to court.

The case, which dates back to pre-2015 when the required investment amount was half of what it is today and funding for the same was permissible, sets a precedent that effectively ends a practice that has attracted more than £100 million. 

Home Office on breach of rules

The applicants, the Home Office said, failed to comply with the rules of the scheme because they invested one million pounds in Eclectic Capital, a company owned by the wife of the owner of the firm from which they borrowed the money, Maxwell Holding, on the condition that the money be invested in Eclectic Capital. This violated rules stipulating that the investment must be under the control of the applicant.

“The money lent to you is not under your control because obviously you cannot invest the money anywhere other than in Eclectic,” the Home Office said of its decision to reject the applications. 

In the meantime, the applicants filed for judicial review, arguing that it was unreasonable for the Home Office to expect the investors to have full and unfettered control over the funds at all times, and that in any event they had “effective and ultimate control”. The investors added that they had the legal right to direct the Maxwell loan to any company they saw fit, as well as the right to redeem their shares in Eclectic after six years.

However, in December, the Supreme Court ruled in favor of the Home Office and determined that the word “control” means that an investor has the ability to “manage and/or direct the use of money, assets, or investments.” In real life, also including the “choice and use” element.

To the applicants' counter-argument that the decision to invest in Eclectic was a business decision, the Supreme Court countered that the returns were so low (the upfront interest payments were more than the promised profits six years later) that this “cannot be a valid business argument”.

The Supreme Court cited another violation that unambiguously led to petitioners' case: it said Eclectic's stock was not a qualified investment from the beginning because of paragraph 65(b) of Appendix “A” of the Immigration Rules. That paragraph states that investments in companies that merely pool money and invest it in other firms, rather than using it to run their own business, are not qualifying investments. More than one hundred investors have reportedly taken advantage of this.

In a separate case, Mayfair wealth manager Dolfin, entered into an agreement with Voluntary Requirement (VREQ) not to sell “restricted bonds” to its tier one investor clients in the UK after an audit revealed instances where Dolfin executed trades for investors who bought bonds in companies linked to Dolfin's directors.

The company said in a statement that it would “cease to be involved in structuring, promoting, issuing or distributing bonds and credit facilities issued by companies in which Dolfin or its directors have an interest.”

UK Home Secretary Priti Pater announced the closure of the popular UK Golden Visa program

This information appeared in the British media. The reason for the Government's decision was concerns about the possible use of the program for the purpose of “money laundering”, we note that it was not groundless at all.

Until 2015, the conditions for obtaining a residence permit for investment in this country did not provide for Due Diligence. Applicants were not required to provide documents on the origin of income. As a result, a visa could be obtained by foreign citizens associated with the criminal world.

According to the results of the audit in 2021, it became known that illegal investments were made from China, Russia and Kazakhstan.

According to analysts, there is another reason for the UK to refuse the investor visa. A significant part of golden visas, namely 18% of the total number, since 2008 was issued to Russian citizens. Therefore, in moments of aggravation of Anglo-Russian diplomatic relations, the program popular among Russians lends itself to criticism and checks as an additional “leverage”.

In this case, the immediate and sudden decision of the Government became an occasion for discussion and cannot be interpreted unambiguously.

Analysts are critical of the situation, believing that closing the program without trying to reform it is a missed opportunity to bring economic benefits to the UK at a time of large budget deficits after Covid-19.