The Tier 1 (Entrepreneur) visa is a great option for migrants looking to get a good foothold in the UK and build their business from the ground up, as long as they have the means to make a success of themselves and also have a business plan that will positively affect the UK economy.

Part of being able to extend a Tier 1 (Entrepreneur) visa relies on showing that the £200,000 initially promised in their first application has indeed been invested into the business already. This is typically achieved in three ways:

  • Transfer a loan of £200,000 from the personal account of the company owner to the business account.
  • The owner can purchase items or services directly related to the business, and keep invoices and receipts as proof of investment.
  • Cash investments, where things are purchased with cash on behalf of the business and receipts are presented as evidence of investment.

However, as many of our readers will already know, it is not always as simple as it appears on paper and often the Home Office can be hard to predict from case to case. There is no one size fits all route to UK citizenship no matter what avenue an applicant is trying to go down towards it. Sometimes, even an applicant believes that they have prepared almost everything, their application can still be refused by an unexpected reason, no matter how trivial it is. The following case proves just this.

The case of Sajjad’s Grill and Restaurant:

Mr Sajjad came to the UK from Pakistan as a Tier 1 (Entrepreneur) migrant and fulfilled his ambition of starting his own business, an eatery called Sajjad’s Grill and Restaurant.

The time came for Mr Sajjad to extend his visa, so he began to make the necessary preparations to do so, including proving that he had invested £200,000 (or more) into the business so far. This should have been no problem because Mr Sajjad had transferred almost £500,000 from himself personally to his UK company.

However, the Home Office decided he had not done this in one of the ways prescribed by the Immigration Rules, so an extension application was refused on 27 May 2015.

It should be pointed out that when Mr Sajjad came to the UK he came with his wife and three children as his dependants. Therefore once his renewal was unsuccessful, it also meant that the whole family’s status would be in danger.

Despite one of these specific ways, accepted within the Immigration Rules, being money transferred into the business account as a ‘Directors Loan’, which is what Mr Sajjad’s accountant labelled the transfer into the business account, Mr Sajjad was still unsuccessful in his extension application.

After a lot of stress and legal wrangling Mr Sajjad found himself in the Court of Appeal trying to get his refusal overturned.

It was Mr Sajjad’s case that his refusal was purely due to a technicality issue. During the application, the Home Office had been demanding that Mr Sajjad provide proof that his loan to his business was unsecured and subordinated in favour of third-party creditors. This is otherwise known as the ‘Director’s Loan Agreement’.

Mr Sajjad appealed against the Home Office’s refusal on two grounds. Firstly, he believed that his investment method did not belong in the “director’s loan category, so he should not be required to provide relevant evidence of the “director loan” investment form. He went on to say that the evidence he provided at the time of application was sufficient to prove that he had invested money in the company.

Secondly, he believed that the Home Office’s definition and description of the “director’s loan” is unclear. Therefore, the Home Office should have given him an opportunity to provide more relevant evidence instead of directly refusing his application.

In response to the first reason the judge said: “As long as the loan relationship occurs between a director and a company, then the form of this ‘director loan’ should obviously be established in full.”

In response to the second claim the judge said: “While immigration law stipulates, the immigration officer must use “Evidential flexibility” i.e. if a few pages are accidentally lost or omitted, the immigration office should generally ask the applicant for additional documents to supplement the missing documents, instead of directly rejecting the application; (however), it is not relevant to this case.”

This is because an entire section of the application was left out, rather than just a couple of pages of a much larger document. Essentially, the applicant does not have the right to more time.

Eventually, Mr Sajjad’s appeal was dismissed on the ground that he failed to provide with his application a director’s loan agreement, contrary to the requirements of the Immigration Rules.

How many options an entrepreneur will have to invest into his/her business?

A peculiar aspect of this case is the fact that the judge only mentioned two options open to Tier 1 (Entrepreneur) migrants to show that they have invested £200,000 into the business:

‘that the effect of paragraphs 46 and 46-SD is that an applicant for leave to remain under the PBS, who seeks an award of points on the basis of an investment in a UK business, must establish that the investment has taken one of only two permissible forms: investment by way of a director’s loan, or investment by way of purchase of share capital.’

Definition of Director’s Loan (from page 53 of the Tier 1 (Entrepreneur) guidance):

This only applies to migrants who become directors of a company. A director’s loan to the company will be considered for the award of points as long as it is unsecured and subordinated in favour of third-party creditors.

This means that the loan agreement states that any loans to third parties are to be repaid before the director’s loan is repaid.

For the purposes of this guidance an unsecured loan is where the applicant has loaned money to the business that is not secured by property or assets that become subject to seizure on default. Third-party creditors are those individuals or companies that the business owes money to, not including the applicant.

Definition of Share Capital (from page 53 of the Tier 1 (Entrepreneur) guidance):

If the applicant has invested by way of share capital, the business accounts must show the shareholders, the amount and value of the shares (on the date of purchase) in the applicant’s name as it appears on their application.

If the value of their share capital is not shown in the accounts, then they must supply a copy of the company’s register of members from Companies House.

The accounts must clearly show the name of the accountant, the date the accounts were produced, and how much the applicant has invested in the business. The accounts must be prepared and signed off by the accountant in accordance with statutory requirements.

So these are the ones specified during Sajjad’s case, and neither of which were completed to the correct standards, so one can argue that he was rightly (if a little harshly) denied his extension.

However, there is a third route that is not mentioned within the case:

Definition of ‘Direct Cash Investment’ (from page 53 of the Tier 1 (Entrepreneur) guidance):

To make sure the money is used by the business, the applicant must provide the accounts of that business for assessment. These accounts must show the investment in money made directly by the applicant, in their own name.

It is quite telling of the state that the system is in when during a court hearing the full body of options for the applicant is not stated. In fact, it was left to Mr Sajjad to explain to the Court of Appeal the policy basis for, and existence of, this third method of investment permitted by the Home Office.

Mr Sajjad argued that he was investing in the company’s bank account and then using the funds to develop the business and that there was no ‘director’s loan agreement’ for this purpose. However, from the limited information provided in the case, it does not look that he had provided sufficient evidence to prove his case on this point.

What can we learn from this case?

Firstly, we must take in the fact that the judge only mentioned two options during the hearing (directors loan and share capital) and seemingly omitted the third option (direct cash investment).

It appears that during his judgment, the judge limited his attention to the Immigration Rules only. It does not look like that he consulted the full entrepreneur guidance at the time, which has more generous provision and allows three options of investment.

To make it worse, Mr Sajjad also failed to refer to the third option directly in this case (it is quite doubtful whether he was aware of such option as well at the time of his application and hence made the relevant preparation).

It has been well established law that the Home Office’s guidance and policies are part of the law and should be complied with by the immigration officers as well in dealing with applications; otherwise, any decision will be rendered unlawful.

If Mr Sajjad had clearly proven that he invested in the form of “direct cash investment” and pointed out that this is a viable option in the immigration guidance document, the results of the case could have been very different.

In the meantime if you have any questions regarding this topic or any other legal enquiries, please do not hesitate to contact us. We are available on 020 7928 0276 or at

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