UK's Immigration Regime: Changes May Affect Indian HNWIs

22 July, 2011

Whilst the latest announcement by the UK government in relation to the new immigration regime for high net worth individuals (HNWIs) promises a fast track to permanent residency and citizenship in the UK, the devil, as they say, really sits in the fine print and the ancillary legislations are governing this area of law.

Pursuant to the new immigration regime for HNWIs, from April 6, 2011, foreign investors who bring £5 million or £10 million into the UK will be able to achieve Indefinite Leave to Remain (ILR) within three and two years respectively. Such HNWIs will also be allowed to be absent from the UK for up to 180 days a year, but it will affect their eligibility for ILR.

Arguably, the most attractive incentive for many wealthy people relocating to the UK is the acquisition of a British passport but, at best, these rule changes will shave just one year off the usual six-year path to citizenship and, at worst, may seriously jeopardise their chances of obtaining citizenship, which usually requires at least five years’ residence in the UK, the last 12 months of which must be with ILR status – with limits on the time allowed to be spent outside the UK. This is because, if they take advantage of the new rules allowing lengthy absences (180 days a year), they may exceed the 450 days (over a five-year period) they are allowed to be outside the UK to be eligible for citizenship.

Accordingly, in the absence of a corresponding change to the rules for naturalisation, which the government has said it does not intend to implement, the increased amount of time that can be spent outside the UK is likely to actually make it more difficult to qualify for citizenship.

In addition, absence from the UK for 180 days annually for a few years by those in search of ILR or citizenship will need to be co-ordinated with adequate international tax-planning measures to ensure that global income streams are ring-fenced from the taxation tactics of increasingly aggressive tax authorities in India.

Perhaps, while contemplating such a move, it will not be out of place to consider using tax-compliant structures through offshore jurisdictions, which will ensure a steady transition to the UK, with all bases covered. Careful planning is necessary to ensure that the requirements and opportunities of the visa regime do not get overlooked.

That said, foreign investors from India should also be aware that due to the UK’s European ‘opt-out’ from the European Union’s relevant treaty mechanism, permanent residence does not give extra rights of residence or establishment in the rest of the European Union. So, they will still need to apply for a Schengen visa to travel to most European countries.

Further from a policy perspective, the accelerated permanent residence may also accelerate the departure of investment funds, since once people have become permanent residents, there is nothing to stop them from moving their money out of the country. This ‘easy come, easy go’ scenario may, in the medium term, wipe out any financial benefit for the UK that the government hopes to achieve with these changes.

While the new rules appear to be a quick fix for the UK Government to attract much-needed funds into the UK, we believe that careful planning and proactive steps to obtain international taxation and immigration advice will be critical for anyone considering this route – so that they are provided with a 360 degree look at their aspirations, assets and objectives for planning their move to the UK.

In conclusion, although the new framework offers the prospect of a straightforward path to obtain ILR and British citizenship, it is fraught with significant pitfalls unless careful planning, with the benefit of expert guidance on the issues that will come into play, is undertaken before moving across under this scheme.

(Saionton Basu is the Co-Head, India Group, Penningtons Solicitors and Tom Clark is  Solicitor, Penningtons Solicitors LLP. Penningtons Solicitors LLP is a  top 100 UK law firm with offices in the City of London, Hampshire and Surrey).

 


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UK's Immigration Regime: Changes May Affect Indian HNWIs

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