Tax Journal

One tax mistake and you’re out

Date: 
16 May 2018

Reports have emerged of individuals being denied indefinite leave to remain in the UK because of tax problems; but is the Home Office best-placed to analyse their tax position before making such a crucial decision on immigration status?

In the last few days, reports have emerged of individuals being denied indefinite leave to remain in the UK because of tax problems. Initially it was quite difficult to see why there is a link between tax and immigration status, but it appears that leave is being refused under s 322(5) of the immigration rules, which applies where ‘it is undesirable to let an applicant stay in the UK because of their character, behaviour or associations, or they are a threat to national security’.

Home Office staff dealing with immigration matters do have the power to seek information from HMRC about an individual’s tax history. One can understand why a person’s tax position might be relevant. There is the obvious case of an individual who has committed serious tax fraud, but another example would be to check a person’s level of income. Generally speaking, it may help someone’s immigration status to have a significant level of earnings, and there is an obvious temptation to overstate earnings in order to boost the chances of being allowed to remain. If a person is declaring higher earnings to the Home Office than to HMRC that is obviously something which needs to be investigated.

But the anecdotal evidence seems to point to a very broad brush being taken and that any sort of tax problem is being used as a reason to involve s 322(5). It appears that it is Home Office staff who are making decisions; often, it seems, based on very little knowledge of the tax system. There are reports of officials not understanding the difference between gross and net income or failing to understand that in most businesses accounts are not drawn up on a tax year basis. The income of a self-employed person which is taxable in 2016/17 may well be the earnings for the 12-month period to 31 December 2016. This can lead to real confusion.

In fact, it seems that any adjustment made to a tax return after submission is seen as grounds for suspicion. Readers will need no reminders about the complexity of the UK tax system and how easy it is to make mistakes or to take a different view to that of HMRC on a particular item of expenditure. There are limited appeal processes available to individuals caught up in this situation and in many cases judicial review (which can be extremely expensive) appears to be the only option.

The full extent of this problem is not clear. Judging by the amount of online discussion on various immigration forums, there are clearly more than a handful of cases. A freedom of information request was made to the Home Office for the number of people who had been refused leave to remain for tax reasons, but this was declined on cost grounds.

There are two issues here: should tax information be used as part of the immigration process; and, if it is, how should it be used? It seems, at least to me, self-evident that the answer to the first question should be yes, so the issue comes down to how it is used. One barrister is quoted as saying that there is ‘a culture of disbelief governing decision making in the Home Office’. It is right that decision makers should approach their task with a degree of healthy scepticism, but it is also important that they are properly trained to evaluate the information which is before them.

The fact that an amendment was made to a tax return several years ago could be a pointer to somebody deliberately not complying with their tax obligations. Equally, it could simply be the correction of an inadvertent error or indeed the outcome of a technical dispute with HMRC. It in itself is not evidence of a person’s character or behaviour. Where a person’s ability to remain in the UK is at stake, proper process is essential. 

Issue: 
Categories: