Tier 1 Entrepreneur: will your business plan be good enough?
We help many entrepreneurs come to the UK to establish businesses. We are more than a firm of solicitors as our team includes accountants and tax advisors making us well-placed to critically assess your business idea’s viability and work on your business plan. If we review your business plan before you make your application for a Tier 1 Entrepreneurs visa and highlight any areas for improvement this can put you in a stronger position.
The Home Office is not inclined to give applicants for an Entrepreneurs visa the benefit of the doubt. Based on our understanding of the UK rules, to help you navigate the requirements for the Tier 1 Entrepreneurs visa we have explained:
- Why do Tier 1 Entrepreneur visas get refused?
- How to maximise the chances of a successful Tier 1 Entrepreneur application
- What should be included in the business plan
- Use of funds used for investment pursuant to the business plan
Why do Tier 1 Entrepreneur visas get refused?
The requirements for a Tier 1 Entrepreneur visa seem very straight-forward. But, the refusal rate from the Home Office is relatively high.
- According to the Office for National Statistics, the refusal rate for Tier 1 Entrepreneur entry clearance visas has since 2013 been around 50%, making it the UK visa route with the highest refusal rate (except for asylum applications).
- Throughout this period, the refusal rate has never dropped below 40% (in the second quarter of 2014) and peaked at 58% (in the second quarter of 2013). The refusal rate for extension applications made in-country is similar.
Common reasons for refusing a Tier 1 Entrepreneur visa
Based on our experience the common reasons fall into:
- Entrepreneurs cannot adequately prove that they have access to £200,000 (or £50,000 in certain, limited circumstances) to invest in a business in the UK;
- Failure to show that the applicant is a ‘genuine entrepreneur’ which usually revolves around failings with the business plan.
Is the Tier 1 Entrepreneur applicant genuine?
You must prove that you are a ‘genuine entrepreneur’. An application can be refused if the Home Office does not believe that you are genuine, even if you meet all the other requirements. The Home Office guidance states that caseworkers must take into account the following factors, amongst others, when deciding if you are a genuine entrepreneur:
- The viability and credibility of the business plan and market research into the chosen business sector;
- Previous education and business experience;
- Any other relevant information.
The genuine entrepreneur assessment appears to be a subjective test taken by the Home Office. The problem is who knows whether a business idea will be successful or not? If a business fails, does this mean that the idea was not genuine? JK Rowling’s Happy Potter script was rejected by all 12 major publishers and Bill Gates’s first business also failed. The media is full of such examples and it is well known that a lot of start-ups fail, for various reasons, even if the idea itself was a good one.
How to maximise the chances of a successful Tier 1 Entrepreneur application
The Home Office guidance to decision makers instructs them to use the business plan to assess how much consideration you have put into your business ventures. The guidance goes on to say that such information can be purchased as a package and to look out for plans that appear general as they may provide an indication that you are not genuine.
So a well thought-out and researched business plan is the key to success. In this, you must show that you have engaged with the business idea, and have thought about the practical aspects of establishing the business in the UK.
If the business plan is robust, it is then much more difficult for the Home Office decision maker to refuse an application simply based on his/her subjective opinion that the business idea itself is bad.
Structure of the business plan under a Tier 1 Entrepreneur visa application
Most entrepreneurs will be familiar with business plans setting out the vision for their company, projected sales, turnover and profit. The business plan necessary for a successful Tier 1 Entrepreneur application goes above the normal requirements of a business plan.
What the Home Office is looking for
The Home Office’s decision-makers will not only want to see that the business idea is viable, that you have an intricate knowledge of the UK market, that you have thought about your business’s position within that market, and that you will be capable of actually running the business on a day-to-day basis; they will also want to be assured that you can and will comply with the Entrepreneur visa requirements.
Viability of business
The Home Office will firstly want to see that the idea is capable of becoming a profitable business. As demonstrated by our examples above, this can be subjective. The business plan is an opportunity to ‘sell’ the idea and make it come alive. It is important to give reasons and provide examples, if possible.
Knowledge of the UK market
As a Tier 1 Entrepreneur visa applicant you will have to show that you have done market research into the chosen sector. You must also demonstrate how the proposed business will fit into the existing market. If you can identify a gap in the market or can demonstrate a unique selling point then that will be a bonus.
Using statistics and examples to back up your assertions will add credibility to the business plan. Making broad generalisations will normally be taken to mean that you have not thought about your business in depth and in turn are not genuine.
Qualification and business experience
The Tier 1 Entrepreneur rules do not strictly require you, as the applicant, to have formal qualifications or training. However, successful entrepreneurs are generally expected to be highly skilled individuals. Home Office decision-makers are told to consider the visa applicant’s particular business experiences and their relevance to the business that he/she proposes to establish.
If your career to-date is very different to your proposed business in the UK then you must explain why you are making the career change. You must also explain how the skills you acquired will benefit you in your new venture.
It is particularly important to demonstrate that you have the relevant experience to run the business and provide the evidence to back it up. Providing hard evidence in the form of your CV, certificates and references will help your case.
If you plan to join a business you will have to detail how exactly you will add value to the business. You will need to explain how your investment and expertise will promote growth in revenue and business activity. The Home Office is not only concerned with the success of the business, but also how you will bring new knowledge and expertise.
Use of funds used for investment pursuant to the business plan
You must show that the funds are available to be invested into a new or existing business. The business plan must therefore set out how the funds will be invested and give reasons for those specific investment choices. It would be beneficial to show that you have thought about the business’s location and premises.
You must also create the equivalent of at least two new full-time jobs for settled workers; the business plan must therefore address how these positions will be created, paid for and maintained for the required length of time.
The investment propositions must not only make sense, they must also be permitted by the Home Office. For example, money invested in the form of a director’s loan will not score the necessary points for a visa extension, unless it is unsecured and subordinate to other creditors loans to the business. Equally, investment in residential accommodation, property development or property management are not qualifying investment.
Do not shy away from detail
The Home Office want to be sure that as a Tier 1 Entrepreneur applicant you will actually invest the funds. Business plans are often drafted for the purpose of seeking investment and do not include the level of detail the Home Office is looking for.
You should detail exactly what you will spend the money on. Talk about the equipment you will buy, the price of premises, the marketing, the expected salaries of your employees, their roles and how they in-turn will add value. Do not only state what you intent to do, also explain how you will do it.
Tier 1 Entrepreneur eligibility when setting up a franchise in the UK
Starting or investing in a franchise is an option for those seeking to come to the UK as a Tier 1 Entrepreneur. Franchises make up a large proportion of businesses started by Entrepreneurs.
Visa applicants wishing to establish a franchise must meet the same requirements as all other applicants but may find it easier to demonstrate the viability of the business, as well as the results of market research, by reference to other existing franchises.
Establishing a franchise may be a particularly attractive option for those seeking investment if they can demonstrate the success of individual branches, as well as the overall business.
Support for your Tier 1 Entrepreneur visa
Providing a standard business plan, or merely taking a copy from the internet, will most likely lead to a refusal of your UK Tier 1 Entrepreneur visa. You must be involved in writing the business plan, as you may be asked to an interview where you will be asked questions about yourself, the business plan and the proposed business.
It is important that you come across as genuine and that you know your business plan well. You must also ensure that all the figures, experience and qualifications are accurate. We will review to check that the documentary evidence supports all of the claims you make in your business plan.