The UK has opened a new path to citizenship for British National Overseas (BNO) residents in Hong Kong. This BNO visa opened for applications on 31st January 2021.
In recent years, there has been a significant level of political distress in Hong Kong. In the summer of 2019, there were months of protests in reaction to a proposed extradition law. This would have given Hong Kong authorities the power to detain and transfer people to the mainland of China. Many feared this could be used to target journalists and activists and would give China added influence over Hong Kong.
In June 2020, China imposed a new national security law for residents of Hong Kong. That led UK Prime Minister Boris Johnson to pledge to change immigration rules for BNO status holders in Hong Kong and promised to provide a new route to citizenship as well.
Here we’ll cover who is eligible for the BNO visa, the costs involved, potential tax implications and the impact on property buyers and investors.
What is BNO status?
BNO is a type of British nationality, which was created in 1985 as part of the Sino-British Joint Declaration. It was open for people in Hong Kong to apply for before the 1997 handover to China. This allowed people to retain a link with the UK if they wished to. BNO is a lifelong status, but it can’t be passed down to family members.
In the past, the BNO status hasn’t provided special rights. Prior to this visa scheme, BNO passport-holders could visit the UK without a visa for six months. However, they didn’t have the right to work, live or take up long-term study in the UK.
What is the new BNO visa?
BNO citizens are now able to apply for a visa to reside in the UK for a period of 5 years, or an initial 30 months, which can be extended for an additional 30 months. After five years, many will then be eligible to apply for settlement, also called indefinite leave to remain. And 12 months after that, those that meet the requirements can apply for British citizenship.
Through the new visa, applicants will be able work, study and use the National Health Service. However, public funds can’t be claimed. Dependent children will be able to attend free state schools if they are under the age of 18 and can attend training and education if they are aged 16 to 19 years old.
For those eligible for the BNO visa, applications can be made online. During the application process, applicants will need to book an appointment at a visa application centre. Additionally, from 23 February, BNO status holders who have an eligible biometric passport will be allowed to use the “UK Immigration: ID Check” smartphone app to complete their application at home.
Who is eligible for the BNO visa?
The new scheme allows BNO citizens and their close family members to apply for the visa. For those applying from outside the UK, the applicant and their family members must normally reside in Hong Kong. And for those presently in the UK, the applicant must normally live in the UK, the Isle of Man, Guernsey, Jersey or Hong Kong.
There are approximately 400,000 BNO passports in circulation with about 200,000 applications pending. However, the UK government stated that a BNO citizen will not need to have a valid BNO passport to demonstrate their BNO status.
The government has estimated 5.4 million Hong Kong residents are eligible for the new visa, which is equivalent to nearly three quarters of Hong Kong’s population of approximately 7.5 million. Of those eligible for the BNO visa, 2.9 million have BNO status, 2.3 million are their dependents and 187,000 are aged between 18 and 23 and have at least one parent with a BNO passport.It’s hard to predict how many people eligible for the new visa will move to the UK.
An impact assessment undertaken by the government has estimated 300,000 people will apply for the new visa in the first five years. The Home Office has said approximately 7,000 people from Hong Kong have already been allowed to settle in the UK since July. They were granted Leave Outside the Rules, which allowed the government to use its discretion over immigration rules on compassionate grounds.
What costs are involved?
When applying for the BNO visa, each applicant must pay £180 for the 30-month visa or £250 for the five-year visa. Additionally, the Immigration Health Surcharge will also need to be paid for when applying. For an adult, this is £1,560 for the 30-month visa and £3,120 for the five-year visa. For each child under the age of 18, this is £1,175 for the 30-month visa and £2,350, for the five-year visa.
On top of that, applicants will be required to prove they can financially support themselves and any dependents for their first six months in the UK. It’s also important for applicants to be aware of living costs in the UK, and this does vary depending on where they plan to live.
What does the visa mean for property buyers and investors?
In the past few years, the UK property market has seen an influx of interest from Hong Kong property investors as the sector has proven to have long-term stability. The average UK property price is much lower than the average house price in Hong Kong. The current favourable exchange rates for Hong Kong investors and relatively low mortgage interest rates in the UK have recently made it particularly appealing for property investment.
When moving to the UK or purchasing property, there are a range of tax implications to consider, whether you’re an overseas buyer or a resident buyer. This includes income tax, inheritance tax, stamp duty and capital gains tax.
Stamp duty implications
Stamp duty is based on a property’s value and if a buyer is a first-time buyer or not. There is also an additional 3% surcharge for second homes and buy-to-let properties. Buyers and investors have been able to take advantage of the stamp duty holiday, which started on 8 July 2020 and is set to end on 31 March 2021. The higher rate for additional properties still needed to be paid. However, this tax holiday still saved numerous investors thousands of pounds.
From 1 April 2021, an additional stamp duty surcharge of 2% will take effect for all non-UK resident investors. The new non-UK resident surcharge considers a purchaser a UK resident when they are present in the UK for at least 183 days during a continuous 365-day period. The period starts 364 days before the transaction effective date and ends 365 days after that.
If the buyer meets these resident conditions within 12 months following the property transaction, the buyer may be entitled to a refund. The buyer will have up to two years to amend the return to claim repayment for the non-UK resident stamp duty surcharge. However, there are differing rules for co-purchases with non-resident buyers and purchases made through international companies. It’s recommended to seek out professional tax advice before making any financial decisions when moving overseas or investing in property.