T1E Extension Refused

[vl2019]

Hi all,

I have first received my Tier 1 Entrepreneur visa in September 2015, and have successfully invested and appointed a director in December of the same year (this was an already existing business). I have since been working in the business as a Director of IT, specifically in the Data Management department. I should also mention that I have not been the Managing Director of the business, I was only in charge of some of the operational aspects (mainly the development of new features on our websites and all things data related).

The business is structured as follows:

We have an umbrella company (Company A, where I have invested via share capital) with three wholly-owned subsidiaries (Company B, C and D). Company A itself does not do any business, but acts as a holding company for the 3 subsidiaries, which operate in the same sector but offer slightly different services (subsidiaries used to be separate companies, but have merged before I came on board). Some of the employees are employed by Company A (the ones who would typically work across all 3 subsidiaries) and some are directly employed by the subsidiaries. The salaries of the ones employed by Company A are paid by Company A, but it would then charge Company B, C and/or D for parts of their salary based on the amount of time spent working on such company in the month (we have a system in place to calculate the appropriate split). Any expenses such as rent, software, stationary and etc are also recouped from the subsidiaries. The result is that effectively Company A should always be at net £0 in terms of P&L.

On a side note, I have been told by the Home Office representative that I am not allowed to use Company B, C or D's employees for an accelerated ILR application, so I've had to rely on the employees directly employed by Company A (6 under Company A, and 16 spread across the subsidiaries).

I've had my interview recently (to confirm genuine entrepreneurship, agents have visited our offices), and now the Home Office is seeking for additional information. For example, when I joined the company, the other directors have used the services of the consultancy agency regarding tier 1 investments (facilitation and advice). The consultancy fee was paid after I joined, using the funds I've invested, and I am now being told by my immigration solicitor that this may raise red flags since the Home Office may take a view that this was not a legitimate business expense (partly because it's labelled as "Investor Fee - my name" on the bank account).

My question is - how likely is it that the last point will cause issues in my application? And are there any other issues that I may be missing?

Will be happy to provide more information.

[marcnath]

I am not sure if the fee itself is a matter of concern.
But overall, there are likely to be challenges.
I was only in charge of some of the operational aspects (mainly the development of new features on our websites and all things data related).
This would be the biggest area of concern.
When it comes to an interview, you are likely to be asked all kind of questions about the company operations, financials, policies, etc and if you are unable to answer those effectively, the chances of a refusal based on genuineness becomes very probable.
You have an Entrepreneur visa, not a Director visa (there is no such thing) so the expectation of your involvement in all aspects of your company is very high.

[vl2019]

Thank you for your response.

I should clarify that although I am not in the management department, I do know and have access to every aspect of the business.

My main concern at the moment is what view will the Home Office take on my business. Will it be just the Company A in isolation or will they consider the consolidated group? If former, they could potentially take a view that I have done work for companies I am not a director or direct owner of, which is a violation of my leave. However, in my mind the subsidiaries and my company (company A) should be considered one entity in this case, as the success of Company A depends solely on the growth of the subsidiaries. I would love to hear your thoughts on it.

[marcnath]

Thank you for your response.

I should clarify that although I am not in the management department, I do know and have access to every aspect of the business.

My main concern at the moment is what view will the Home Office take on my business. Will it be just the Company A in isolation or will they consider the consolidated group? If former, they could potentially take a view that I have done work for companies I am not a director or direct owner of, which is a violation of my leave. However, in my mind the subsidiaries and my company (company A) should be considered one entity in this case, as the success of Company A depends solely on the growth of the subsidiaries. I would love to hear your thoughts on it.

You are right to be concerned if your cost was also recovered from the subsidiaries (which it looks like it was). The subsidiaries are separate legal entities and will be considered to be separate companies for this purpose. If they do, your visa will probably be curtailed and you may need to go to court to get that argument of yours accepted (it is not an unreasonable argument).

Normally, as an entrepreneur, if my company had subsidiaries, I would be a Director of each of those subsidiaries too. In which case, this would not be an issue.

But I suspect you are a minority shareholder.

The challenge is that there are clearly people who use the Tier 1 Entrepreneur route to get their visas if they have 200K to invest in a company. I even attended a seminar couple of years back where someone was literally promoting this.

That is not the purpose of the route (there used to be an investor visa route for that) and I would expect an "entrepreneur" to have a significant role in the direction of the business, etc.

It will all boil down to how much HO decides to drill down. If you have submitted the absolute minimum of the documents required, some of these things would not be noticed. But if you have submitted an accounts were revenue = costs exactly, that would raise flags for me. So, it may boil down to what your CW will look at.

[vl2019]

Good evening all.

I have received my T1E extension refusal this week after waiting for over 1 year since lodging my application and am preparing my AR application to be lodged next week.

The refusal letter was quite lengthy, I have tried to post a link to the redacted version here, but the system won't allow it.

The structure of the business in question is Company A is a holding company that doesn't trade on its own, and Companies B, C and D are the fully-owned subsidiaries through which the trading activities are carried out. As such, the main purpose of Company A is to ensure the success of Companies B, C and D.

I am a minority shareholder (2.5%) and a director of Company A, which makes me the ultimate owner of Companies B, C and D by virtue of common ownership. I have 2 co-directors in Company A, who own 97.5% (even split between them). One of the directors is also a director of Companies C and D, and the other is a director of Company B.

Any expense that Company A bears is recharged to Companies B, C and D (salaries, rent, software and etc). Example: Employee of Company A spends 50% of their time working on Company B, 25% on Company C, and 25% on Company D, therefore, their salary is invoiced to each of the 3 subsidiaries accordingly to this percentage.

Now on to the refusal itself: Some of the points raised by the caseworker are completely incorrect. Such as:

• HO claims that Company B is not a fully-owned subsidiary of Company A, which is a blatant oversight on their part as we have filed a confirmation of statement dated October 2017 that the shares previously owned by one of the directors were fully transferred to Company A. This is available on Companies House.

• The salary drawn by myself and co-director are from my investment capital, rather than profits. Although partly true, my salary was not drawn from the investment capital, but rather revenues the business has made. I have invested in late 2015 and only started to draw a salary in late 2017. There is no legal or immigration requirement of the business being profitable before directors can draw a salary. I also do not see how the fact that my co-director has been paid a salary is relevant to my case, as this should be considered a legitimate business expense.

As you will see in the refusal letter, HO argues that I have worked in companies that I do not own and nor am I a director of. However, I do own these companies through Company A, and there is no requirement of being a director of all 4 (I can find no evidence that this requirement exists, only that I can not work in any business I do not own).

Lastly, the third major point of refusal was a sourcing fee the company has paid shortly after I invested. I am trying to argue that a company operating in such a niche business needed investment to survive (hence the reason why my co-directors have sought to find T1E investors), therefore should be considered a legitimate business expense. I can see where HO's coming from here, and am prepared to make a director's loan to the company to cover this fee (I would have done this prior to applying for an extension if I didn't genuinely think that this was a legitimate business expense).

Given the lengthy description above, how likely, in your opinion and based on your experience, that my AR will be successful?

My co-directors have also applied for a Tier 2 Sponsorship Licence very recently, and have an upcoming compliance visit next week. This was done as a contingency plan to keep me as an employee since I am a key person that cannot be easily replaced. Do you think my Tier 1 background will harm our chances of becoming a sponsor? I was identified as a candidate in their application, and the title is on a shortage occupation list.

Many thanks in advance.

[marcnath]

1. On the point of salary being drawn from investment, you have a strong case if revenues cover you salary. As you mentioned, the co-directors salary is immaterial. Those should be relatively easy to overturn.
2. Not sure where you found the a condition that you - "only that I can not work in any business I do not own". The actual words in the immigration rules are that you can only work for companies " the applicant has established, joined or taken over". It is very difficult to justify that the subsidiaries (which are independent companies) satisfy that condition. In other parts of the immigration rules, it is clear that the joining or take over date is the date you become a Director.
3. I can't see how they can justify the sourcing fee not to be included as investment since that was not paid to you. This is again something most likely to be overruled in an AR if argued properly.
4. While I don't think this should have a direct impact on the Tier 2 licence, if you are determined as having violated the Conditions of your Visa, your application for Tier 2 could well be refused.

[vl2019]

1. On the point of salary being drawn from investment, you have a strong case if revenues cover you salary. As you mentioned, the co-directors salary is immaterial. Those should be relatively easy to overturn.
2. Not sure where you found the a condition that you - "only that I can not work in any business I do not own". The actual words in the immigration rules are that you can only work for companies " the applicant has established, joined or taken over". It is very difficult to justify that the subsidiaries (which are independent companies) satisfy that condition. In other parts of the immigration rules, it is clear that the joining or take over date is the date you become a Director.
3. I can't see how they can justify the sourcing fee not to be included as investment since that was not paid to you. This is again something most likely to be overruled in an AR if argued properly.
4. While I don't think this should have a direct impact on the Tier 2 licence, if you are determined as having violated the Conditions of your Visa, your application for Tier 2 could well be refused.

Many thanks for your response. Very encouraging to hear regarding points 1 and 3.

I should also mention that Company A, i.e. the holding company, was established in February 2015. The shares of Company B, C and D were transferred from to Company A in December 2015 (shortly after my investment and appointment as a director of Company A). Will this information help with the argument I am making in my AR?

[marcnath]

1. On the point of salary being drawn from investment, you have a strong case if revenues cover you salary. As you mentioned, the co-directors salary is immaterial. Those should be relatively easy to overturn.
2. Not sure where you found the a condition that you - "only that I can not work in any business I do not own". The actual words in the immigration rules are that you can only work for companies " the applicant has established, joined or taken over". It is very difficult to justify that the subsidiaries (which are independent companies) satisfy that condition. In other parts of the immigration rules, it is clear that the joining or take over date is the date you become a Director.
3. I can't see how they can justify the sourcing fee not to be included as investment since that was not paid to you. This is again something most likely to be overruled in an AR if argued properly.
4. While I don't think this should have a direct impact on the Tier 2 licence, if you are determined as having violated the Conditions of your Visa, your application for Tier 2 could well be refused.

Many thanks for your response. Very encouraging to hear regarding points 1 and 3.

I should also mention that Company A, i.e. the holding company, was established in February 2015. The shares of Company B, C and D were transferred from to Company A in December 2015 (shortly after my investment and appointment as a director of Company A). Will this information help with the argument I am making in my AR?

Unfortunately, the timing of when the structuring was made has no impact.