New Home Office Guidance on Tax Discrepancies and ILR Applications
On the 16 January 2020, the Home Office published guidance on Indefinite Leave to Remain (ILR) applications by those in the UK on Tier 1 visas where there are tax discrepancies. The guidance was published to address the issue of those who apply for ILR and declare different earnings to the Home Office in their ILR application form than their declared income to the tax office (HMRC) in their tax return. As January is the tax return deadline and thoughts turn to settling and making ILR applications in the New Year this blog looks at the latest Home Office guidance on ILR applications and tax discrepancies.
Indefinite Leave to Remain solicitors
If you need advice about your application for Indefinite Leave to Remain or if you’ve had your leave to remain application refused and want expert ILR advice call London based Indefinite Leave to Remain solicitors on 0203 959 9123 and speak to one of our experienced ILR solicitors at OTS Solicitors or complete our online enquiry form.
Home Office and HMRC data sharing
In an age of>Tier 1 cases where applicants were applying for Indefinite Leave to Remain there were discrepancies between the self-employed earnings some applicants had claimed points for in their Tier 1 (General) applications and the earnings they reported to HMRC and were taxed on.
Even though the discrepancies were sometimes historic in nature (as they related to earlier Tier 1 applications) Home Office officials were none the less refusing the ILR application on conduct grounds. From the Home Office perspective there was either an attempt by ILR applicants to be dishonest with their Immigration application or a fraud on HMRC by deliberately reducing income to minimise tax liability.
The ILR tax discrepancy guidance
The Home Office guidance was issued after a court case called Balajigari v Secretary of State for the Home Department  EWCA Civ 673. The court case was about paragraph 322(5) of the Immigration Rules.
Paragraph 322(5) of the Immigration Rules says leave to remain should be refused if it is undesirable to permit an ILR applicant to stay in the UK because of their conduct. Conduct or behaviour includes convictions which do not fall within other Immigration Rules, character or associations or threats to national security.
For a number of years, the Home Office refused some ILR applications by applicants who reported a different income in their ILR applications to the income disclosed in their tax return. The Home Office argued that both incomes could not be right and referred to paragraph 322(5) of the Immigration Rules and conduct.
The case of Balajigari
The court of appeal case of Balajigari v Secretary of State for the Home Department  EWCA Civ 673 looked at the Home Office practice of refusing ILR applications because of perceived financial irregularities between the Indefinite Leave to Remain settlement application form and the applicant’s tax return. The court case found that the Home Office should allow ILR applicants to explain apparent financial discrepancies prior to the refusal of an ILR application.
In response to the Balajigari court case the Home Office has published two lots of new guidance on:
- How Home Office officials should assess concerns about false representations in Immigration applications and
- How Home Office officials should assess apparent discrepancies between Immigration applications and HMRC documents.
The new Home Office tax guidance is designed to help Home Office caseworkers with situations where there are concerns about earnings discrepancies because of:
- Apparent over declaration of earnings in Immigration applications and
- Apparent reduced declared earnings to HMRC.
The Balajigari guidance
In the Home Office document on tax discrepancies and Immigration applications guidance is given to Home Office officials on the key points of the Balajigari case, namely:
- Home Office officials can use paragraph 322(5) of the Immigration Rules to refuse Immigration applications in cases involving false earnings. The paragraph of the Immigration Rules isn’t restricted to cases involving national security
- Home Office officials do not have to make enquiries of HMRC or to accept and follow the stance taken by the Inland Revenue case workers. That means even if HMRC did not impose tax penalties, the Home Office can still refuse the ILR settlement or Immigration application
- Home Office official should carry out an assessment rather than simply accept an ILR applicant saying that they made a mistake on their tax return and with the information supplied to HMRC and that the financial information in their ILR application is correct
- Every Immigration application has to me looked at on its own merits. That means even if a Home Office official thinks that there was dishonesty in the Immigration application or the tax return, leave to remain can still be granted depending on the circumstances surrounding the ILR application
- In appropriate cases, Home Office officials must give ILR applicants the chance to respond to the allegation of discrepancies between the Home Office Immigration application paperwork and the HMRC documents. Home Office officials should do this by sending a ‘minding to refuse letter’ so the ILR applicant knows the seriousness of the concern about the apparent financial discrepancy.
The minded to refuse letter
Receiving a ‘minded to refuse’ letter can be a terrible blow after you have submitted an ILR application. The best thing that you can do if you get such a letter is to take expert legal advice from ILR solicitors on how to respond to the Home Office allegations to stand the best chance of securing Indefinite Leave to Remain.
The first thing to say about the minded to refuse letter is that Home Office officials don’t always have to send a minding to refuse letter before refusing your ILR application based on concerns about tax discrepancies or false representations. The new Home Office guidance sets out a non-exhaustive list of factors that Home Office officials should assess prior to sending a minded to refuse letter, such as:
- The amount of the discrepancy in income between the HMRC paperwork and the Immigration application
- Whether the self-employed earnings were genuine or not
- Whether discrepancies could potentially be explained away, for example through use of different accounting years for self-employed applicants or because the ILR applicant received additional income, such as divided payments
- Whether the discrepancy actually effected the ILR applicant’s eligibility for Indefinite Leave to Remain or a Tier 1 visa application
- Whether there appears to have been an element of dishonesty in the timing of any amendments to the HMRC paperwork
- Whether a genuine mistake was made and whether there were reasons for the error, such as the health of the ILR applicant.
If a Home Office official is not satisfied that there is a genuine explanation for the apparent financial discrepancy, the minded to refuse letter should be sent detailing the concerns about the financial paperwork and inviting a reply from the ILR applicant.
It is vital that if you do get a minded to refuse letter that you respond with a detailed explanation and supporting paperwork. That is because the Home Office guidance tells Home Office officials that they should not simply take the Indefinite Leave to Remain applicant’s response as sufficient explanation for any financial discrepancy. If the Home Office official isn’t fully satisfied by the response to the minded to refuse letter they can ask the ILR applicant to attend for an interview.
Indefinite Leave to Remain solicitors
If you need advice about your application for Indefinite Leave to Remain or if you’ve had an application for ILR refused and want expert advice about your ILR options call London based OTS Solicitors on 0203 959 9123 and speak to one of our expert Indefinite Leave to Remain solicitors or complete our online enquiry form.
The Home Office tax discrepancy consideration process
The Home Office guidance on how to deal with tax discrepancies between>ILR application; namely:
- Initial consideration of the apparent discrepancy against all relevant factors
- Send the minded to refuse letter to the ILR applicant (the letter should be detailed and can request the provision of additional paperwork)
- Consider the ILR applicant’s response against all the other relevant factors
- Make a decision
The Home Office discrepancy assessment
The Home Office guidance document for caseworkers is a helpful tool for ILR solicitors as it sets out the sort of factors the Home Office should consider when deciding whether to refuse an ILR application on the grounds of conduct under paragraph 322(5) of the Immigration Rules or false representations.
Important points to note in the Home Office tax discrepancy assessment guidance are:
- The significance of any discrepancy between information provided to the Home Office on earnings and to the Inland Revenue depends on the context and the ILR applicant’s total level of earnings. If, for example, a Tier 1 ILR applicant earns about £20,000 and there is a discrepancy in income reported to the Home Office and to HMRC of about £5,000, the discrepancy will be thought to be significant. However, if the Tier 1 ILR applicant has an annual income of £200,000 a discrepancy of £5,000 may not be assessed as significant
- Discrepancies that are thought to be ‘very large’ are discrepancies between Home Office ILR application income figures and HMRC figures of £10,000 a year or more and should always be questioned by Home Office officials when assessing the Indefinite Leave to Remain application
- The length of time that elapsed between any incorrect HMRC tax return and the ILR applicant contacting HMRC to correct the return should be considered. The Home Office will particularly question the situation if there was a delay of over twelve months in contacting HMRC to resolve the discrepancy, especially if the size of the income discrepancy or issue on the tax return was such that it should have been obvious that the figures provided to HMRC were wrong
- If there is a fundamental difference between the information provided by the Indefinite Leave to Remain applicant to the Home Office and on the tax return to the HMRC this is likely to be viewed seriously. For example, if the ILR applicant says they are self-employed earning £36,000 per year in the ILR settlement application but says in their HMRC tax return that they did not earn income from self-Employment during the same reported financial year
- Home Office officials are advised to look at an ILR applicant’s earnings (through looking at HMRC information and paperwork) during the whole of their time in the UK on a Tier 1 visa or other visa, rather than just the period that is relevant to the Indefinite Leave to Remain application. This is because historical discrepancies are viewed as relevant as they still go to the ILR applicant’s conduct or honesty. For example, if records show similar mistakes in income levels on HMRC returns this may mean that a mistake made at the time of the ILR application is not as significant or indicative of dishonesty
- HMRC records showing earnings that are a lot lower, throughout an applicant’s period of work in the UK, than those claimed in their Tier 1 (General) visa applications, are more likely to be a false representations to the Home Office in the Tier 1 or ILR applications
- If the HMRC information on the applicant’s tax return shows that the applicant was in full time salaried Employment but the Indefinite Leave to Remain application says the applicant is self-employed and earning a significant amount through their own business this will be treated as suspicious especially if the evidence relating to the self-employed income is thought to be of poor quality
Any allegation of tax discrepancy or false representation in an Indefinite Leave to Remain application is serious and therefore needs to be robustly addressed by you. It is best to take legal advice so that your ILR solicitor, armed with information from your accountant, can provide a full and reasoned explanation for any apparent discrepancies between data held by the Home Office and HMRC.
Indefinite Leave to Remain solicitors
Do you need help with your Indefinite Leave to Remain application? Call the specialist Indefinite Leave to Remain solicitors based in central London on 0203 959 9123 or complete our online enquiry form.
OTS Solicitors are experts in immigration law. The solicitors in the ILR team have substantial experience in applications for Indefinite Leave to Remain and in challenging refusal of ILR applications.
London based OTS Solicitors are Legal 500 and Chambers Guide to the Legal Profession recommended Immigration lawyers and have Law Society accredited solicitor status as trusted specialists in Immigration law.
For fast and friendly advice on the Life in the UK test, your planned application for Indefinite Leave to Remain or your best UK settlement options call OTS Solicitors on 0203 959 9123 to speak to one of our experienced London Indefinite Leave to Remain solicitors or complete our online enquiry form.