New points-based immigration system: firm and fair?

Announcing its intention to attract “the brightest and the best” from around the globe, the government has published a policy statement on ending free movement of people and bringing in a new points-based immigration system. The government claims that the UK is “open for business” and that the new immigration rules will allow highly skilled migrants to come and take up employment in the UK.

 

This is the time for employers and their advisers to become familiar with the immigration policy that will apply after the Brexit transition period ends, and understand how the evolving landscape of the various visas can encourage a skilled workforce and much-needed foreign investment to the UK.

 

While the government has addressed in some detail the proposed changes to the Tier 2 (General) visa, which is the main visa route for skilled workers coming to the UK to take up employment, it has mentioned very little about whether the system for investors on Tier 1 visas will change after the Brexit transition period ends. The government should consider examining these as they provide important foreign investment, which will be much needed following Brexit. A recent judicial review decision demonstrates how a strict interpretation by the Home Office of the Immigration Rules may needlessly discourage investment in the UK (R (JW and others) v Secretary of State for the Home Department [2019] UKUT 00393 (IAC)).

For Tier 2 (General) visas, the salary requirement for entrants is currently at least £20,800 a year for new entrants and £30,000 a year for skilled workers (see feature article “Immigration law: the points-based system in practice”). To apply for this visa, an individual must have a job offer and a certificate of sponsorship from a UK employer with a valid Tier 2 sponsor licence.

 

Tier 2 visas have been the subject of a recent government-commissioned report on the Australian-style points-based system and salary thresholds by the Migratory Advisory Committee (MAC) (the MAC report), published on 28 January 2020.

 

One of the recommendations in the MAC report, which the government has accepted in its policy statement, is the reduction of the general salary threshold from £30,000 to £25,600 (see box “The MAC report”). Many employers will welcome this reduction, which is intended to reduce the cost to the employer while still preserving the integrity of the labour market by not undercutting existing workers. However, the MAC report does not recommend any exception for jobs on the shortage occupation list for fear of perpetuating the relevant shortages.

 

In addition, the system is designed to be flexible so that individuals earning less than the minimum salary threshold may still obtain a visa by “trading” characteristics, such as a specific job offer or qualifications, against a lower than minimum salary in order to achieve the requisite 70 points (see box “Skilled worker characteristics”).

 

The recommendations in the MAC report follow in short order after a previous raft of changes in October 2019, including the expansion of the Tier 2 shortage occupation list, resulting from a previous MAC report published on 18 September 2018. The government’s swift implementation of the suggestions in the previous MAC report is a strong indicator that the current MAC recommendations will be included in the Immigration and Social Security Co-ordination (EU Withdrawal) Bill (Immigration Bill), which is due to be published in April 2020.

 

While the full extent to which the government will implement the recommendations in the MAC report will not be known until the Immigration Bill is published, the MAC predicts that Brexit will lead to reduced immigration, and a lower rate of growth in population, employment and GDP (gross domestic product). It also says that it expects there to be a small increase in GDP per capita, improved public finances, and less pressure on health, schools and social housing. It suggests that there will be slightly increased pressure in social care and a small rise in the dependency ratio; that is, the ratio of people of non-working age compared with the number of those of working age.

 

The MAC accepts that these predictions are subject to considerable uncertainty and that there is no robust way to accurately and objectively predict future skills shortages. Therefore, the real effect of these changes is yet to be seen.

Investors on Tier 1 visas can live and work in the UK after investing at least £2 million, and subsequently obtain British nationality. In R (JW and others), the Upper Tribunal in the Immigration and Asylum Chamber examined a number of Tier 1 applications and found that many of the investment schemes in the case were not compliant with the Immigration Rules and therefore the applications failed. The tribunal decided to interpret the law on investment products using the “ordinary meaning” of the terms of the Immigration Rules. Sadly, the meaning of many of the complex financial products cannot be described simply by using their ordinary meaning. They should be examined by looking at the definitions provided by banking and financial instrument law.

 

A woman, identified in the case as A1, and Ms Wu were both sold a product by Maxwell Holding Limited whereby Maxwell Asset Management Ltd (Maxwell) loaned £1 million to A1 and £5 million to Ms Wu. A1 and Ms Wu both invested in Eclectic Capital Limited (Eclectic). The owner and director of Maxwell Holding was Mr Kirpichenko, and the sole director of Eclectic was his wife, Ms Kirpichenko. In 2014, A1 entered into a loan agreement with Eclectic under which she would lend £1 million to Eclectic for a term of five years; Ms Wu entered into a materially similar loan agreement with Eclectic for £5 million.

 

In 2017, the Home Office refused both A1 and Ms Wu’s applications for leave to remain as Tier 1 migrants on the basis that they did not have control over their money at the point of investment. The Home Office judged that the terms of the loan agreements between the applicants and Maxwell meant that they did not have a free choice to invest in Eclectic; rather, they were required to do so. It also decided that the lack of returns to the applicants in their respective investments cast doubt on whether they were genuinely investing funds under their own control.

 

On judicial review, the tribunal held that the links between Maxwell and Eclectic, and the terms of the loans, entitled the Home Office to conclude that A1 and Ms Wu did not choose to invest in Eclectic but were required to do so. It was relevant that, while A1 and Ms Wu claimed to be making a business decision to invest their loaned money in Eclectic, the returns were poor and this was a factor in determining whether they had control over their investment money.

 

Neither of the applicants had any financial or personal links with the directors or the companies involved. The applicants seem to have relied on investment advice on where to place their money in order to secure a visa. It seems odd that the Home Office therefore sought to frustrate what, on the facts, seem to be genuine applications.

 

It also appears unusual that the tribunal agreed with the Home Office that the money was not under the applicants’ control when that was clearly not the case. The applicants had made a commercially sensible decision to invest their money, yet the tribunal took a very narrow meaning of control of the funds, essentially inferring that, because they followed Maxwell’s investment recommendation, they did not have control of the funds. This may be problematic in the future as the delegation of functions to investment advisers is common and will discourage investment in the UK.

 

A1 and Ms Wu are currently awaiting permission to appeal to the Court of Appeal. The policy statement is available here.

 

 

 

Mark Smith appears in immigration and associated judicial review proceedings, including human rights applications for leave to remain outside the Immigration Rules, and asylum and humanitarian protection. Recently, Mark successfully appealed the Home Office’s decision to refuse his client’s asylum claim made on the basis of genuine fears of honour-based violence on return to Pakistan. 

This article was originally published by Practical Law on 26 March 2020, you can view the original article here.