Refusals of ILR due to tax discrepancies

Legal Updates


Since January 2015, nearly 1,700 applications for Indefinite Leave to Remain in the UK from people with Tier 1 leave to remain have been refused by the Home Office, under paragraph 322(5) of the immigration rules.

People with leave to remain under Tier 1 of the Points Based System can apply for Indefinite Leave to Remain after five years’ residence in the UK and if they are able to demonstrate, among other things, English language ability, education and earnings.

Back in May last year, we wrote about people facing removal from the UK under this paragraph of the immigration rules, simply because of tax discrepancies.

Tier 1:  Tier 1 is part of the Points Based System.

There were and are several sub-categories under Tier 1, such as Post Study Work (now closed); investor; exceptional talent; and entrepreneur/graduate entrepreneur. There was a also a ‘general’ sub-category, which is now closed.

To be eligible for the general category Tier 1, you needed to have a high level of previous or prospective salary and qualifications. Applicants for the entrepreneur category generally need to have access to £200,000 of investment funds. Investor applicants need access to two million pounds of investment funds.

What is paragraph 322(5)?

The Home Office have the power to refuse immigration applications using one of the “general grounds for refusal” in the Immigration Rules.

The general grounds for refusal of leave to remain are found at paragraph 322 of the Immigration Rules, and the recent cases are being refused under subsection 5 of this paragraph, which says that leave to remain and variation of leave to enter or remain in the United Kingdom should normally be refused based on

(5) the undesirability of permitting the person concerned to remain in the United Kingdom in the light of his conduct (including convictions which do not fall within paragraph 322(1C), character or associations or the fact that he represents a threat to national security;

The controversy arose because the Home Office was using this paragraph to refuse applications for Indefinite Leave to Remain based on discrepancies in reporting income for tax purposes to the Home Office (in immigration applications) and to HMRC (in tax returns). The Home Office used these discrepancies to say the applicant had demonstrated deception or dishonesty, therefore their conduct fell under this paragraph.

There has been understandable outrage about this, as the Home Office’s own guidance on this paragraph suggest it should be used in cases that involve “criminality, a threat to national security, war crimes or travel bans.”

It seems that legal arguments that tax discrepancy cases cannot fall under paragraph 322(5) are likely to be rejected, however.

In recent cases heard at the Court of Session in Scotland (written about on the Free Movement blog here), this argument was dismissed and the judge said that the cases do fall under this paragraph.

As the blog post points out, the Home Office guidance also says:

When deciding whether to refuse under this category, the key thing to consider is if there is reliable evidence to support a decision that the person’s behaviour calls into question their character and/or conduct and/or their associations to the extent that it is undesirable to allow them to enter or remain in the UK.

Home Office reviews ILR refusals

Following the controversy around these cases, the Home Secretary announced a review of the Home Office’s use of Paragraph 322(5), which was published in November 2018.

The Home Office said that they had no plans to change the approach taken to deciding the majority of these cases.

But two additional instructions have been given to Home Office caseworkers for all tax discrepancy refusals (“all refusals where data from HMRC is referenced”).

  • The applicant must be interviewed. As has been pointed out on the Free Movement blog, the Home Office’s guidance on these applicants contains a useful “interview tips” document – written for decision-makers, but useful for interviewees to read too. You can find that document here.
  • A witness statement from HMRC must be obtained prior to the decision being made.

Mistake or deception?

One of the crucial issues that many of the appeals of these refusals has been considering is whether the tax discrepancy has been a mistake, or deception.

The Home Office review of these cases stated that in 88% of the refusals, the tax discrepancies amounted to more than £10,000 and therefore they did not consider these to have been the result of an innocent mistake.

Many people subject to refusals have argued that the mistake was due to their accountant. In the case of Khan (written about on Free Movement here), it was determined that the applicant must take some personal responsibility – why did they not realise that the accountant had made the mistake (as they would normally be asked to confirm their tax returns)?

The judgment in Khan highlights that, on the Home Office side, they should decide if there was a plausible explanation for the discrepancy, and seek to establish the facts surrounding the discrepancy (including by asking the applicant for evidence).

In a major judgment from the Court of Appeal (April 2019), it was found that the Home Office’s approach to these cases was “legally flawed”, as applicants had not been given an opportunity to explain discrepancies.

Scale of the problem

As mentioned above, since 2015 there have been nearly 1,700 refusals of ILR applications on the basis of paragraph 322(5).

As a result of the Home Office review, it reversed its decision in 37 cases, were formally reconsidering another 19 and further action was required in 56 cases.

The Home Office lost two thirds of the appeals that have so far gone to the First-tier Tribunal.

The Guardian reported this month that there are 372 outstanding appeals against paragraph 322(5) at the First-tier Tribunal.

As we wrote back in May, the human cost of these refusals are very high.

The Guardian reports that “up to 87 highly skilled migrants had already been wrongly forced to leave the UK” and reports on the story Nisha Mohite who says the Home Office “wrecked her life”. You can read that article here.

Meanwhile, the campaign group Highly Skilled Migrants are working with Migrants Rights Network to challenge the “disproportionate” use of Paragraph 322(5) in the courts.


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