Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The writer is a partner at law firm Maurice Turnor Gardner
This time last year, it was clear that a Labour government was on the horizon. There was likely to be an exodus of those resident non-domiciled taxpayers who found themselves the target of both then-chancellor Jeremy Hunt’s Budget and the Labour party’s manifesto. As anticipated, I have devoted much time since to counselling clients on the pros and cons of leaving the UK.
But as the doors closed on the 2024-25 tax year in early April and we started to focus on the next 12 months, the biggest (and most welcome) surprise has been the number of enquiries we are receiving from those who want to move to the UK. Geopolitics is a driver but current chancellor Rachel Reeves’ new tax rules may be playing a part, alongside language, culture, education and stability. The Foreign Income and Gains regime she introduced allows four years of tax-advantageous living for new or returning UK residents who qualify.
Whatever the reason, interest in moving to the UK is on the increase. But it may stop at interest. There is a yawning disconnect between the system that seeks to incentivise the tax-free influx of capital into the UK and the practical reality of the immigration regime. When my clients learn that in order to gain a route to stay legally in the UK we have to shoehorn them into narrow categories, they are bemused, then frustrated. For my clientele who have already created significant wealth but do not fit the categories, the position is very unwelcoming.
We have been approached by a French client for whom the new tax rules seem to be designed. He and his wife are French nationals and live in France. They have never lived in the UK. He has successfully established, nurtured and disposed of several businesses. He now wants to base himself in London for a few years.
In the post-Brexit world, the standard visa options for him are (i) work; (ii) business creation; or (iii) “global talent”. The global talent route is eliminated because his considerable talents do not fall within academia or research, arts and culture or digital technology. He has no interest in being employed so is left with the option of starting a new business.
The rules here would require him to generate a new business plan and obtain endorsement from a third party. Given that he has a proven record of entrepreneurship, he is unimpressed by the idea that he would be subject to supervision from an endorsement body. It would also be hard to demonstrate that any business he would create would be innovative. Establishing a branch of his existing French business in the UK to obtain a licence to sponsor him is not commercially viable and is disproportionate in both costs and time, given that its sole supposed purpose would be to facilitate his leave to remain.
Since the abolition of the Tier 1 Investor visa, which required an applicant to invest £2mn-£10mn in a qualifying UK portfolio, in February 2022, there is no route for this so-called passive investor, who has freely disposable capital and an inclination to contribute to the UK economy. (Recent reports that the government may introduce an investor visa are welcome.) We understand that this government is looking for growth and inward investment to support that growth. But my client is very willing to use his funds to benefit the UK economy if we could work out what that means. He recognises that he needs to contribute if he is to have the privilege of becoming resident and that contribution will take the form of cash brought to the UK.
How would that cash be invested to benefit the economy? This is a question that others are certainly better equipped to answer, but I believe that clients would welcome a hybrid approach where a certain proportion of the cash would have to be invested in UK-listed securities (not government bonds) and the balance committed to a venture-capital world helping drive the innovation the chancellor is seeking. This would be halfway between the Tier 1 visa of the past and the Innovator visa of today.
Clients are excited about the possibility of taking advantage of the tax incentives this government has introduced to attract them to move to the UK. I am excited about them too and am doing my best to sell a future in the UK, but the clients and I stumble when it comes to the immigration hurdles.
The question I cannot answer is why it is acceptable for the government to offer individuals tax-free residence for a period of four years but not acceptable to offer residence in exchange for investment. We must be capable of crafting an immigration system that is grounded in passive investment but which can also benefit the UK economy. This would unlock the immigration door for those whose resources we need.