Government Launches New Immigration Category To Attract Innovators To The UK

On 25th July 2000, the Government formally announced the launch of a two year pilot scheme to attract entrepreneurs with "innovative business ideas" to the UK. The pilot scheme will commence on 4th September 2000. This is the first new immigration category to be introduced since the Investor category in October 1994. The Government hopes that the new Innovator category will plug the existing gap in the Immigration Rules which makes it difficult for many foreign nationals to set up new businesses in the UK.

Under the existing Immigration Rules, a businessman can establish a business in the UK if he is prepared to invest 200,000 pounds of his own money in the business and can create jobs for at least two UK residents. A wealthy entrepreneur can come to the UK as an investor but he is required to show that he has at least 1 million pounds, 750,000 pounds of which must be invested in UK Government bonds or share or loan capital of UK registered companies. Employees are dealt with under the Work Permit Scheme.

A typical innovator is not an employee; he will be the driving force behind, and a major shareholder in, the business. In order to meet the requirements of the Work Permit Scheme, the individual would have to be a genuine employee and have a shareholding compatible with that status. The Department for Education & Employment (which administers the Work Permit Scheme) has been flexible pending the introduction of the Innovator pilot scheme but is uncomfortable approving permits where the individual has a substantial shareholding. Typical innovators have not yet made their fortune and therefore are unable to meet the financial criteria of the Businessman and Investor categories. Most innovators will be relying heavily on private equity houses to supply the necessary capital for their business venture.

The Innovator pilot scheme has been drafted with these issues in mind and is the product of close co-operation between various Government departments, in particular, the Department for Education & Employment, Department of Trade and Industry and Home Office.

In order to be considered under the new scheme, the applicant will first have to satisfy three basic requirements. He must maintain a minimum 5% shareholding of the equity capital, demonstrate that the proposed business will lead to the creation of at least two full time jobs and, in addition, show that he can maintain and accommodate himself and his family until the business provides him with an income.

The Government looked at a number of overseas models for assessing proposed business ventures and has decided to use a points scoring system, which has some similarity to the system used by the Canadian immigration authorities. In order to make a successful application, the applicant must achieve a minimum score in each of three separate areas and a higher overall score. The three areas are personal characteristics, (business experience, educational qualifications and proven entrepreneurial ability), the general business plan (including evidence of the technical, commercial and financial viability of the plan and proposals for the establishment of a management team), and thirdly, the economic benefits of the business plan (the number and skill levels of the jobs which will be created and the innovative aspects of the proposals).

The pilot scheme will be run by the Business Case Unit of the Home Office in Croydon. The Business Case Unit has recently been revamped and is keen to receive applications under the Innovator category. In line with the Government's more relaxed attitude to business immigration generally, the Home Office has indicated that applications from potential innovators may be accepted whilst they are already in the UK, unless they are here in the capacity of visitors. Normally applications should be made from the innovator's nearest British diplomatic post overseas.

The Business Case Unit is aiming to turn around these applications within two weeks from the date of receipt by the Home Office. Obviously, if an application is submitted overseas, there will be some delay while the British diplomatic post forwards it to the Home Office.

As with all applications, the more documentary evidence that can be supplied with the application, the better. Certainly, it will be necessary to provide academic certificates, employers' references, research, financial and technical references, a full business plan containing a marketing plan and evidence of the individual's shareholding in the proposed company.

Under the pilot scheme, innovators will be given leave to remain in the UK for an initial period of 18 months which can be extended to 4 years on application. After 4 years, innovators may apply to stay in the UK indefinitely.

The Government hopes that the pilot scheme will attract a large number of entrepreneurs to the UK, particularly in the science, technology and e commerce sectors. With less than a month before the introduction of the pilot scheme, practitioners are advised to start preparing applications now.

For further information contact Julia Onslow-Cole on tel 020 7367 2733 or e-mail [email protected].