The Court of Appeal has handed down a blockbuster judgment on the highly controversial use of paragraph 322(5) of the Immigration Rules to refuse settlement to migrants over alleged tax discrepancies. It says that the Home Office’s stance in these cases is “legally flawed” and needs a major overhaul to make refusals legal.

All four of the linked appeals were decided against the Home Office. The case, one of the most important of 2019 to date, is Balajigari v Secretary of State for the Home Department [2019] EWCA Civ 673.

Summary of conclusions

The high powered bench — Lord Justices Underhill, Hickinbottom and Singh — cover a great deal of ground in their 223-paragraph decision, but handily summarise their conclusions at the end. There is also a press summary (pdf).

The Secretary of State’s approach was flawed, the judgment says, principally because

… he proceeded directly from finding that the discrepancies occurred to a decision that they were the result of dishonesty, without giving applicants an opportunity to proffer an innocent explanation. But nor does he address the further questions of whether the dishonesty in question renders the presence of the applicant in the UK undesirable or whether there are other factors which outweigh the presumption in favour of removal, or give applicants the opportunity to raise any matters relevant to those questions: such cases will no doubt be exceptional, but the step cannot simply be ignored. The availability of administrative review is not an answer, not least because the applicant is not normally allowed to produce evidence that was not produced before the original decision.

Paragraph 221; emphasis added

The court does say that there is a lawful way for the Home Office to go about its business. The Secretary of State could set up

a “minded to” procedure, which informs applicants of his concerns and gives them the opportunity to show cause why ILR should not be refused by offering an innocent explanation of the discrepancies (which will need to be particularised and documented so far as possible) and/or drawing attention to matters relevant to the “undesirability” or “discretion” issues.

Paragraph 222

And the flaws identified do not mean that all paragraph 322(2) refusals are now null and void. A paragraph 322(5) tax refusal will not be quashed if the Upper Tribunal is satisfied “that the result would have been the same even if the applicants had been given an opportunity to explain the discrepancies”. Indeed, the court remitted three of the four appeals allowed for a fresh look in the tribunal. The appellants do not necessarily get indefinite leave to remain, in other words. But they do get a second bite at the cherry in front of an independent judge.

The 59-page judgment contains a great deal of legal discussion for lawyers, jurists & academics; but, most important of all, this is a clear “win” for over 70 other Apps waiting to go to COA & hundreds of others appealing to FTT @alisonthewliss @byameliahill #HostileEnvironment

— Parm Saini (@PPSSaini) April 16, 2019

Background

The Home Office has for several years been exercised about migrants whose tax affairs appear dodgy.

Officials identified hundreds of cases where self-employed migrants submitted tax returns to HMRC showing lower earnings than declared to the Home Office for visa purposes. The old Tier 1 (General) visa had a minimum earnings requirement, giving holders an incentive to falsely inflate their earnings to qualify for settlement.

A Home Office review published in late 2018 said that almost 1,700 indefinite leave to remain applications from Tier 1 (General) migrants had been refused since January 2015.

The refusals were issued under paragraph 322(5) of the Immigration Rules. It applies where it is “undesirable” to permit an applicant to remain in the UK “in the light of his conduct … character or associations or the fact that he represents a threat to national security”.

The fact that this seems aimed at altogether more heinous behaviour than tax discrepancies was one source of controversy. Unfortunately, the Court of Appeal found that paragraph 322(5) does not apply only to cases where there is a threat to national security.

More importantly, perhaps, those affected also complained that the tax discrepancies identified were often innocent mistakes. They claimed that a heavy-handed Home Office did not give people a chance to explain themselves before trying to eject them from the UK. The official approach to the problem was “refuse them all and God will know his own”, as barrister Julian Norman memorably put it.

That, essentially, the Court of Appeal agreed with.

Reasoning

The Court of Appeal found that dishonestly giving either HMRC or the Home Office false tax information certainly can justify a refusal of settlement. It rejected the argument that paragraph 322(5) can only be used in national security cases:

it is clear both from the [paragraph 322(5)] Guidance itself and from the terms of the rule that it is not restricted to such types of case. We are aware that there has been concern expressed both in Parliament and elsewhere that paragraph 322 (5) may be being used for a purpose for which it was not intended. In particular, there have been suggestions that it may have been intended to apply only to cases where there is a threat to national security. In our view, it is clear from its terms that that is not so.

Paragraph 32

But suspicion of dishonesty is not enough. Officials have to make an active decision that the person has been dishonest. And before making such a life-altering decision, the Home Office has to least alert the person involved of its suspicion and give them a chance to make their case:

we have come to the conclusion that where the Secretary of State is minded to refuse ILR on the basis of paragraph 322 (5) on the basis of the applicant’s dishonesty, or other reprehensible conduct, he is required as a matter of procedural fairness to indicate clearly to the applicant that he has that suspicion; to give the applicant an opportunity to respond… and then to take that response into account before drawing the conclusion that there has been such conduct.

Paragraph 55

This does not necessarily involve an in-person interview, though. “A written procedure may well suffice in most cases”, the judgment says.

Even if a finding of dishonesty is made, the Home Office must go on to consider whether this dishonesty makes the presence of an applicant “undesirable”. This reflects the actual wording of paragraph 322(5).

When making that assessment, the Home Office should conduct a balancing exercise, and consider all relevant factors. These could include a substantial positive contribution to the UK made by the applicant, or the length of time which passed since the misconduct in question (paragraph 38).

And even if the Home Office finds that there was dishonesty, and that the presence of the applicant in the UK is “undesirable”, there is a further step to take. Officials must consider whether, notwithstanding the “undesirability”, there are other factors which would justify granting leave, for example the welfare of any minor children affected, or other human rights issues. The Court of Appeal conceded that those cases would be exceptional, but that is a step which must be taken.

In other words, before refusing, the Home Office must:

1. Let the applicant know that they are minded to refuse, and allow them a chance to submit more information as to why they should not be refused. 
2. With all of the evidence in front of them:
   • Consider whether the applicant was dishonest
   • Consider whether, even if dishonest, the applicant’s presence in the UK is undesirable
   • Consider whether, even if dishonest and undesirable, the applicant should be granted leave for other reasons

Article 8

The Court of Appeal also goes into considerable detail on whether these cases have a human rights angle. It concluded that the Article 8 right to private and family life will “typically” be a factor, given the length of residence applicants will usually have spent in the UK. That means that tribunal can decide for itself whether the applicant had acted dishonestly in any appeal or judicial review challenge to the refusal, not just consider whether the Home Office’s conclusion was rational.

The problem is that many of those cases will not automatically have attracted a right of appeal, unless the person had raised a human rights claim when applying for settlement. Many won’t have done.

What now?

The Court of Appeal was very clear that it intended the judgment to “determine the various issues of principle raised in at least most of the pending legal challenges to […] decisions based on earning discrepancies” and to lay down clear principles to dispose of those challenges (paragraph 9).

There are unlikely to be many people left who apply for indefinite leave to remain now and encounter this issue . The route for indefinite leave to remain for Tier 1 (General) migrants is now closed. But some who had leave as Tier 1 (General) migrants in the past and are now applying on another route may still be caught by these issues.

Although each case is of course fact-specific, it may not necessarily be wise to try pre-empting a refusal by explaining past tax inconsistencies, which may only raise suspicions. If the Home Office is minded to refuse, it should give the applicant an opportunity to explain any issues after the application has been submitted (unless it believes that the application would be refused whatever the reason given by the applicant).

That said, applicants with tax discrepancies may want to get evidence ready in case they are asked for it. Typically the Home Office would only give ten or 14 days for further information to reach them once an application has been made.

More importantly, new applicants who are not making an application which automatically attracts a right of appeal will want to set out in their covering letter and on the form that they are also raising a human rights claim. That way, if the application is refused, they will have a right of appeal at the First-tier Tribunal.

Those who have a pending application, which has not yet been decided, may try adding new evidence to explain why it is also a human rights application. Or they may “vary” it by submitting a new form (for example, if the applicant has since reached ten years’ lawful residence).

Those who are waiting for a judicial review hearing at the Upper Tribunal, and who have not raised Article 8 grounds, may try to amend them at this stage. The Home Office has indicated, however, that it will object to this, and argue that they should “get themselves a right of appeal”.

In those cases, the Upper Tribunal will need to go on to decide whether a human rights appeal was an available alternative remedy for those applicants. If all else fails, applicants may want to submit a fresh human rights application.

In all the above cases, applicants should ensure that they have legal advice because each case is fact-specific and, more importantly, taking one of the above steps can have serious consequences on their immigration status. If, for example, they submit a new application while an administrative review is pending, they would be withdrawing the administrative review.

This article has been updated since it was first published to add extra information and analysis. CJ McKinney contributed.