Tier 1 Entrepreneur Visa is for doing genuine business in the UK

tier-1-entrepreneur-visaThis explains why Tier 1 Entrepreneur visa is only for doing genuine business in the UK. And also highlights the possible Tier 1 entrepreneur visa refusal reasons for entry clearance, extension and ILR applications. Perhaps, the post tries to explain the purpose of Tier 1 entrepreneur route of doing genuine business in the UK. Therefore, in addition to the Tier 1 entrepreneur refusal reasons usually stated in the refusal letter, the post also to tries to explain the Tier 1 entrepreneur visa refusals in the context of actual and perceived abuse of the System, subjectivity and flaws of Genuine Entrepreneur Test and Unclear Policy Objectives that may have indirectly resulted in refusal of otherwise maintainable applications.

Tier 1 Entrepreneur Visa is for doing genuine business in the UK

Apparently, when introduced in 2008, the Tier 1 entrepreneur visa route for migrant was essentially points-based application. However, over the years due to the abuse of the Tier 1 entrepreneur visa route, the applications are not assessed and decided solely on points and there are a lot of subjective elements such as an applicant’s personal academic background, experience, business plan, market research, nature of business and job creation so on and so forth.

Subjective Nature of Tier 1 Entrepreneur Visa Application

Perhaps, all these subject factors associated with a Tier 1 entrepreneur visa entry clearance, leave to remain, extension and an indefinite leave to remain (ILR- settlement) application help establish the genuineness of investment funds, business activity and job creation. Certainly, Tier 1 entrepreneur visa route is only for those applicants who intend to do a genuine business in the UK and not for merely to seek British citizenship!

Tier 1 Entrepreneur Visa Refusal Reasons: Entry, Extension & ILR

Perhaps, most of the Tier 1 entrepreneur visa applicants are quite intelligent and resourceful. And also usually belong to the upper strata of the society. Therefore, most of the applications are not refused due to an applicant’s inability to fulfil the requirements of the Tier 1 Entrepreneur, but their inability to clearly establish genuine intentions of doing business in the UK.

A holistic viewpoint suggests that the Tier 1 entrepreneur refusal reasons fall under four broad categories:

  1. An inability of an applicant to meet the requirements
  2. Actual and Perceived Abuse of the Tier 1 entrepreneur visa migrant route
  3. The subjectivity of the Genuine Entrepreneur Test
  4. Unclear Policy Objectives of Tier 1 entrepreneur visa route

The Inability to Meet Tier 1 Entrepreneur Visa Requirements

Tier 1 Entrepreneur visa refusal reason due to an inability of an applicant to meet the requirements are usually unverifiability of the source of funding, doing Business in the UK is not the Main Purpose, Generic Business Plan, Insufficient Evidence of Employment creation, business registration and shell companies.

Source of Funding: Tier 1 Entrepreneur Visa Refusal Reason

This is a common problem with entry clearance and extension applications. In a number of instances, especially those relating to third-party funding the applicant is not able to provide a satisfactory source of funding and upon checks by the immigration officer, it was found that the money is not available for disposable in the UK.

Doing Business in the UK is not the Main Purpose

If an applicant is not able to satisfy the ECO during the application assessment process, then the ECO is not clear about the purpose and might question the intentions of applicant i.e. the applicant is only using Tier 1 Entrepreneur as a route to settle in the UK, without actually doing business in the UK.

Accordingly, from the evidence available with the application and where applicable during the interview process, the ECO can gather together refusal reasons to justify his opinion about the intentions of an applicant. However, for building a line of argument the ECO usually questions the elements of the genuine entrepreneur test, especially the business plan submitted with the application.

Tier 1 Entrepreneur Visa Refusal Reason: Generic Business Plan

Generic Business Plan has been the major source of Tier 1 Entrepreneur Refusals as most of the applicants have not given importance to the accuracy of the elements of the business plan.

Some business plans which are fundamentally wrong in their approach i.e. instead of justifying investment in the UK, the business plan focuses on imports.

In the case of Entrepreneurial Teams, both the applicants during the interview give a different version of the business plan.

Insufficient Evidence of Employment Creation

In most of the cases, an extension is refused due to insufficient evidence of employment, maintenance or claimed investment.

Shell Companies and Tier 1 Entrepreneur Visa Extension & ILR

Extensions are also refused if the Tier 1 (Entrepreneur) migrants have set up a shell company for meeting the minimum qualifying investment, without any underlying economic activity. In most of the cases, prima facie the shell business creates two jobs; however, the employees are not involved in any meaningful commercial or business activity but are only paid a salary to achieve the objective of meeting the extension and settlement criteria.

Abuse of the Tier 1 Entrepreneur Visa Route and Refusal Reasons

The Tier 1 (Entrepreneur) route is for those who wish to establish a genuine business which intends to generate jobs in the UK. However, during 2008-2012 a significant number of those applying in-country for leave in the route were those that had come to the UK for the purpose of the study and made speculative applications simply to extend their stay in the UKAccordingly, those who have been granted leave as entrepreneurs, relatively few have gone on to engage in genuine entrepreneurial activity and a significant proportion have taken employment in breach of their conditions, typically in low-skill occupations.

Impact of Tier PSW on Tier 1 Entrepreneur Visa Refusals

The Immigration Statistics indicates that during the year ending June 2015. 5,026 in-country applications from Tier 1 Entrepreneur main applicants were considered, out of which 44 per cent were granted. The number of visas being granted in-country under this route increased steadily between 2008 and 2012, followed by a sudden surge in 2013, which is closely linked to the closure of Tier 1 (Post-Study Work) route. There was also a rapid rise in the number of applications being refused in 2013, potentially caused by the introduction of the genuine entrepreneur test. The refusal rate peaked at 67 per cent in the year ending September 2013 before falling back in 2014.

Example of the abuse of Tier 1 Entrepreneur Visa Route

For instance, an applicant initially had leave to remain on Tier 1 (Post-Study Work) visa which was due to expire in December 2013. In October 2013, the applicant set up a business. As proof of business activity, the applicant provided a contract for marketing and advertising services. However, during the assessment process, it was concluded that there was no evidence to suggest that the client had established a legitimate company, or that the two directors of this company. Furthermore, a business owner is required to inform the HMRC if a company is active within three months of starting a business. The applicant had not registered with HMRC, so neither the company was active nor the owner had complied with HMRC regulations.

Tier 1 Entrepreneur Visa Refused after Interview

At an interview, the applicant initially stated that they were going to run a marketing company, but later stated they were looking to run an HR consultancy business and/or recruitment agency. The candidate provided no details as to how the £50,000 would be invested, given that they were running the business from home using a computer, internet connection and printer. The applicant was refused a Tier (Entrepreneur) visa on the basis that their application was not considered genuine.

Tightening of Route and Increase in Tier 1 Entrepreneur Refusals

Since 2013, the Home Office has introduced a number of measures to tighten the route against suspected abuse. In January 2013, the genuine entrepreneur test was introduced, which included the option for caseworkers to request that applicants attend an interview. Further changes saw migrants unable to switch from Tier 4 unless they had £50,000 funding from a specified source. In July 2014, the Home Office restricted the provision to switch into the category from study categories and the Tier (Post-Study Work) category, pending further investigation and consideration of other remedial measures. Consequently, the number of extension applications reduced from 5,936 in 2013 to only 1,273 in 2015 and success rate nearly doubled in 2017 to reach a level of 67.29%, which in 2013 reached its lowest ebb of 35.92% due to a poor quality of extension applications.

Poor Quality of Applications: Tier 1 Entrepreneur Visa Refusal Reason

Applicants switching to the entrepreneurial route from another immigration category, rather than those who applied overseas to enter as a Tier (Entrepreneur), account for the higher proportion of poor quality and potentially abusive applications at the extension stage.

Leakage from the System

Applicants granted initial leave to enter or remain as a Tier 1 Entrepreneur visa migrant is required to apply for an extension of three years; however, during 2008-2012 relatively fewer apply for an extension. The leakage indirectly contributed towards a higher refusal rate of the entry clearance applications as the assessment became more subjective due to rigorous use of genuine entrepreneur test and finding faults in the business plan and during the interview process.

The Subjectivity of Genuine Entrepreneur Test

The Genuine Entrepreneur Test is quite subjective, therefore, during the assessment process, a number of questions regarding the genuineness of any Tier 1 Entrepreneur Visa Application can arise. For instance, questions about the source of money, education, and skills set of the applicant to run a business in the UK successfully, previous experience of the UK, business and marketing research.

Accordingly, the ECO through the paper genuineness test or oral genuineness test can fail any application as ample arguments can be built for either passing or failing a genuineness test. Therefore, it is mostly a grey area and greatly depends on the quality of the documentation and the performance of an applicant during an interview.

Applicants with a good track record of working as a businessperson, with adequate education and immigration history have a fair chance to pass the Genuine Entrepreneur Test.

Subjective Mechanism & Increase in Tier 1 Entrepreneur Refusals

The genuineness test as currently practised brings a level of uncertainty to the route that is not helpful for the applicants, immigration advisers or the businesses involved in the process.

The genuine entrepreneur test is a subjective mechanism to differentiate entrepreneurs who wish to set up a valid business are able to meet the entry criteria.  The genuine entrepreneur test was introduced in Jan 2013 to reduce the perceived abuse of the route. However, since then the Tier (Entrepreneur) route remains highly susceptible to being abused. The process for assessing the suitability of Tier (Entrepreneur) application is flawed and therefore often fails to differentiate between genuine and non-genuine applicants.

The genuineness of Business Vs. Likelihood of Success

The Government cannot determine ex-ante which combinations of applicant and business plan might become commercial successes, nor would it be advisable to aim to do so. Therefore, currently, immigration officers aim to assess the genuineness of the business plan rather than its likelihood of success.

Dissuades Potential Entrepreneurs

The complexity of the genuineness test prevents the Tier (Entrepreneur) route from being truly effective. The rules of the genuineness test are overly convoluted and unclear to the extent that they may be dissuading potential entrepreneurs from applying for the visa. There is a distinct lack of clarity in the requirements associated with the genuineness test. Consequently, there is a need for a more structured, transparent guidance to be available to applicants.

Insufficient Training of the Immigration Officers

The immigration officers should be provided with specialist training as insufficiently trained to make decisions about applicants and business plans, not least as a result of the criteria being too subjective.

Unclear Policy Objectives of Tier 1 Entrepreneur Visa Route

There is an ambiguity to clearly define an ‘entrepreneur’ under Tier 1 Entrepreneur visa route, which has been correctly pointed out in the report of MAC, which states:

There is often an overlap in the definitions of entrepreneurs and the self-employed. However, using the OECD definition above, it is possible to be a self-employed business owner that does not engage in entrepreneurial activity. For example, small business owners may not be considered “entrepreneurial” if they only take on small levels of risk and do not provide new and innovative services.

In practice, any business has a risk and return profile and most of the applicants only intend to establish a similar line of business, which they are already successfully doing in their home country.

Policy Bias Towards High Skill Businesses

Apparently, the MAC report clearly emphasizes the differentiation of businesses on the basis of skill level. Perhaps, this indicates the mindset of the policymakers. However, the Tier 1 entrepreneur visa policy guidelines don’t differentiate businesses on the basis of skill. And also on the basis of economic sectors.

The Table below illustrates the details of the Tier 1 Entrepreneur Businesses during 2008-15. The MAC findings indicate:

Indeed, there are some highly skilled industries which are more prevalent amongst the businesses set up by Tier 1 entrepreneurs than in the overall UK business population. 8 These include the professional, scientific and technical activities sector and the information and communication sector, which jointly account for approximately 36 per cent of Tier 1 entrepreneurs’ activity. However, there is also a substantially higher prevalence of Tier 1 entrepreneurs in the more generally lower skilled wholesale and retail trade, administrative and support service activities, and accommodation and food service activities sectors.

Table  –  Tier 1 Entrepreneur Visa Business List 2008-2015
Business Sector Share of businesses Share of employment Turnover (£000s)
Wholesale and retail trade, repair of motor vehicle and motorcycles 27% 22% 571,650
Professional scientific and technical activities 24% 9% 126,870
Information and Communication 12% 6% 54,410
Accommodation and food service activities 10% 14% 41,060
Administrative and support service activities 9% 9% 111,170
Other activities 3% 1% 5,410
Real estate activities 3% 2% 20,590
Construction 2% 1% 19,880
Education 2% 2% 13,410
Financial and Insurance activities 2% 1% 7,700
Human health and social work activities 2% 7% 14,890
Transportation and storage 2% 2% 11,320
Arts, entertainment and recreation 1% 1% 3,590

Differentiation between start-ups and existing businesses

Another major theme which has created ambiguity about the objectives of Tier 1 Entrepreneur visa route is the differentiation between business start-ups and existing business. However, on June 13, 2018, the Home Office has announced a new “startup” route, the details of which will be launched in early 2019

The new route, announced during London Tech Week, will widen the applicant pool of talented entrepreneurs and make the visa process faster and smoother for entrepreneurs coming to the UK. It will replace a visa route which was exclusively for graduates, opening it up to a wider pool of talented business founders.

New start-up visa route announced by the Home Secretary

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