Start-up and Innovator: The immigration categories for entrepreneurs

The Start-up and Innovator categories were introduced on 29 March 2019 and effectively replaced the previous Tier 1 (Graduate Entrepreneur) and Tier 1 (Entrepreneur) categories.

Overview

The Start-up and Innovator categories involve a two stage application process.

Applicants first need to apply for an endorsement from a designated endorsing body. As part of the endorsement process, the endorsing body will assess their business plan.

Provided an endorsement is granted, applicants can then submit their UK visa application to the UK Home Office. When deciding applications, the Home Office reserves the right to make its own credibility assessment in relation to the individual, which may involve an interview, and their business plan.

It is important to note that applicants are only able to establish new businesses or join businesses that they have recently established rather than join existing businesses which they have not previously been involved with.

Start-up category

The Start-up category is for applicants who wish to establish a business in the UK for the first time and, provided their application is successful, they will be granted a visa for two years.

It is not possible to extend this visa and time spent in this category does not lead directly to settlement (also known as Indefinite Leave to Remain or Permanent Residence).

The aim of this visa is to provide a route for applicants to progress into the Innovator category.

Requirements

• English language: unless the applicant is a national of a majority English speaking country or has a qualifying degree taught in English, they must pass an approved English language test at level B2 or higher of the Common European Framework of Reference of Languages.
• Maintenance: applicants must hold funds of at least £945 for 90 consecutive days prior to the application date.
• Endorsement: applicants must obtain an endorsement from an endorsing body listed on the gov.uk website and provide a support letter from the body. The endorsing body will assess the applicant’s business plan and provide a letter stating that the business meets all of the following criteria:
  • innovation - the applicant’s business plan is genuine, original, meets market needs and is competitive in its market;
  • viability - the applicant has the knowledge, experience, skills and market awareness to successfully run their business and their business plan must also be realistic and achievable based on the applicant’s available resources; and
  • scalability - the applicant’s business plan can create market growth and job creation in the UK.

Innovator category

The Innovator category is for more experienced business people who wish to establish a business in the UK and, provided their application is successful, they will be granted a visa for three years.

After three years under this category, the applicant can apply for settlement, provided certain requirements are met.

Alternatively, if the applicant cannot meet the settlement requirements, they may continue to extend their visa by another three years. There is no limit to the number of times they can extend this visa until they are eligible for settlement, provided it is clear that the business is continuing to develop.

Requirements for an initial application, or an extension application where the applicant is pursuing a different business venture from the business proposed at the initial application

• English language (as specified above for the Start-up category).
• Maintenance (as specified above for the Start-up category).
• Endorsement from an endorsing body (as specified above for the Start-up category).
• Additionally, the applicant must have funds of at least £50,000 available to invest in their business. This requirement is waived if the applicant is switching from the Start-up category and has made significant achievements in accordance with their business plan. However, depending on the endorsing body, it may require the applicant to show that they have funds in excess of £50,000 available to invest in their business. These funds can come from a third party which may be the endorsing body itself.

Requirements for an extension application where the applicant is pursuing the same business as proposed at the initial application

The applicant must:

• obtain an endorsement letter from the endorsing body which sets out the following information:
  • the applicant has shown significant achievements when assessed against the business plan;
  • the business is registered with Companies House and the applicant is a director of the company;
  • the business is active and trading;
  • the business appears to be sustainable for at least the next 12 months based on its assets and expected income compared to its current and planned expenses;
  • the applicant has demonstrated that they are actively involved in the day-to-day management and development of the business;
  • the endorsing body is reasonably satisfied that the applicant will spend their entire working time in the UK to continue developing their business; and
  • meet the maintenance requirements (as specified above).

Requirements for settlement 

The applicant must:

• obtain an endorsement letter from the endorsing body which contains the information required for an extension application. Furthermore, the letter must confirm that the applicant’s business meets at least two of the following requirements:
  • at least £50,000 must have been invested into the business and actively spent in accordance with the business plan;
  • the business must have created the equivalent of at least five full-time jobs that have an average gross annual salary of at least £25,000 for resident workers (this currently includes individuals who are British citizens, those who hold settled status, EEA nationals under the EEA Regulations until 31 December 2020, British overseas territories citizens and Commonwealth citizens who are in the UK under the UK Ancestry category);
  • the business must have created the equivalent of at least 10 full-time jobs for resident workers;
  • the business must have generated a minimum annual gross revenue of £500,000 in the last full year as shown in its latest accounts, with at least £100,000 generated from exporting overseas;
  • the business must have generated a minimum annual gross revenue of £1m in the last full year as shown in its latest accounts;
  • the business must have engaged in significant research and development activity and must have applied for intellectual property protection in the UK;
  • the number of clients the business has must have at least doubled within the most recent three years and must be currently higher than the mean number of clients for other competitive businesses;
  • meet the maintenance requirements (as specified above);
  • meet the “Knowledge of Life in the UK” requirement by passing a “Life in the UK” test; and
  • meet the residence requirements which state that the applicant must not have been outside the UK for more than 180 days in any rolling 12 month period during the three years prior to the date the application is submitted.

Endorsing bodies

To qualify as an endorsing body, the organisation must meet all of the following requirements.

1. It must be one of the following:

• a UK higher education institution which meets both of the following criteria:
  • the institution is a UK recognized body or a body in receipt of public funding as a higher education institution from the Higher Education Funding Council for England or Wales, the Scottish Funding Council or the Department of Employment and Learning in
  • Northern Ireland; and
    the institution has processes in place for identifying, nurturing and developing entrepreneurs.
• an organisation which meets both of the following criteria:
  • the organisation has a proven track record of supporting UK entrepreneurs, including resident workers, or is a new organisation set up for this purpose by another body which has its own track record of supporting UK entrepreneurs; and
  • the request to become a supporting body is supported by a UK or devolved government department as being clearly linked to the department’s policy objectives.

2. The organisation must be able to competently assess an applicant’s business plan.

3. The organisation must keep in contact with the applicant and follow-up with the applicant at six, 12 and 24 month checkpoints after their application is granted. It must inform the Home Office if the applicant has not made reasonable progress with their original business venture, the applicant is not pursuing a new business venture or if the applicant misses any of these checkpoints without authorisation from the endorsing body.

Credibility assessment

When considering applications, the Home Office will apply a credibility assessment, which has similarities to the Genuine Entrepreneur Test under the Tier 1 (Entrepreneur) category.

When undertaking the credibility assessment, the Home Office must be satisfied that:

• the applicant genuinely intends to undertake, and is capable of undertaking, the business activity specified in the business plan;
• the applicant does not intend to undertake any work in the UK apart from their business venture(s); and
• where applicable, the money made available to the applicant is genuinely available and the applicant intends to use it for the purposes described in the business plan.

In addition to the endorsement, the Home Office may also take into account:

• the credibility of the evidence submitted by the applicant;
• the applicant’s previous educational, work and immigration history;
• the applicant’s declarations to other government departments in terms of their previous employment and other activity in the UK; and
• any information it deems relevant.

The Home Office can request additional information and/or ask the applicant to attend an interview, which will form part of its credibility assessment.

Conclusion

The Start-up category is effectively a re-branding of the previous Tier 1 (Graduate Entrepreneur) category. The UK government decided not to make significant changes to this route as it was felt that this category was working well.

The Innovator route is a significant departure from the previous Tier 1 (Entrepreneur) category. On the positive side, the investment threshold for the visa application is considerably lower (£50,000 as compared to £200,000). However, the requirements for settlement are more challenging to satisfy. In addition, the requirement to obtain an endorsement from an endorsing body is significantly more onerous as many of the endorsing bodies have strict requirements in order to be accepted onto their scheme. Furthermore, many of the endorsing bodies require the individual to allow them to invest in their business, which is not always attractive to entrepreneurs, especially those who are very experienced.

The initial take up for the Innovator category has been low. However, it is expected that the number of applications will increase now that there are significantly more endorsing bodies compared to when the scheme was launched in March 2019. In addition, these endorsing bodies now cover a wider variety of sectors when initially they were mainly tech focused.