(Immigration and Asylum Chamber) Appeal Numbers: HU/04626/2018
THE IMMIGRATION ACTS
Heard at Birmingham CJC
Decision & Reasons Promulgated
On 14 May 2019
On 06 June 2019
DEPUTY UPPER TRIBUNAL JUDGE CHAPMAN
the Secretary of State for the Home Department
(ANONYMITY DIRECTION not made)
For the Appellant: Ms H Aboni, Home Office Presenting Officer
For the Respondents: Mr Parkin, counsel instructed by Rayan Adams solicitors
DECISION AND REASONS
1. The Claimants are nationals of Pakistan born respectively on 19 May 1982 and 24 September 1990. They are a married couple. The First Claimant came to the UK on 22 September 2006 as a student with leave to remain. He subsequently made a number of successful in time applications for leave as a student and subsequently with regard to Tier 1 of the PBS under the Immigration Rules. His wife came to the UK on 11 December 2010 as his dependant and was granted leave in line with her husband. They subsequently had two children, both born in the UK, but neither of whom are qualifying children.
2. The first Claimant made an in-time application for leave to remain as a Tier 1 (General) Migrant on 13 April 2016, however he varied this application on 1 September 2016 to an application pursuant to paragraph 276B of the Immigration Rules on the basis of ten years' lawful residence. This application was refused in a decision dated 30 January 2018, on the basis that the Secretary of State considered it would be undesirable for the First Claimant to remain in the UK pursuant to paragraph 322(5) of the Rules, because he had misrepresented his income to the Secretary of State and HMRC for the purpose of either reducing his tax bill or to obtain leave to remain.
3. It was asserted that in his 2011 Tier 1 application, the first Claimant had declared earned income of £36,226.95 consisting of £10,698.95 PAYE income and £25,528.00 self-employed income. However, in his tax return for 2010-2011 he declared £13,538.00 PAYE income and £12,351.00 self-employed income. The First Claimant subsequently amended his tax return through an accountant in February 2016 where he showed a declared income of £40,620.00 consisting of £15,092.00 PAYE income and £25,528.00 self-employed income.
4. The Claimants appealed, in time, and their appeals came before Judge of the First-tier Tribunal Shanahan for hearing in Nottingham on 25 July 2018. In a Decision and Reasons promulgated on 23 August 2018, the judge allowed the appeal with reference to the Claimants' human rights. The judge was satisfied that the first Claimant had given a truthful explanation for the error in his 2010-2011 tax return and it was not a deliberate or intentional misrepresentation to either the Respondent or HMRC.
5. The Secretary of State sought permission to appeal to the Upper Tribunal on the basis that:-
(1) the judge had failed to give adequate reasons for his findings. In particular why there would be two different sets of figures and in failing to engage with the lacunae of evidence regarding purported contact with the previous accountant who prepared the 2010-2011 tax return and the alleged refusal to subsequently assist the First Claimant. Reliance was placed on the judgment in R (on the application of Khan) JR/3097/2017 as to the fact the First Claimant was blaming his accountant: see  to  of Khan). It was asserted the judge had not given anxious scrutiny to all the relevant factors;
(2) Ground 2 asserted that the judge had failed to give consideration to the fact that the corrected tax return still fails to match the figures provided to the Secretary of State;
(3) Ground 3 asserted that the judge relied on the fact the First Claimant had not suffered any penalty from HMRC to support the conclusion that his actions were not dishonest. However, this does not demonstrate that HMRC were aware of the difference in the application made to the Home Office and that in respect of his income declared to HMRC;
(4) Ground 4 provides:-
" Lastly, the judge's consideration of the policy implies that only if the circumstances identified exist that general grounds of refusal would apply. If the above errors were established, it is argued that such an interpretation is narrower than the policy provides (see 13 to 16 of the Decision and Reasons). The circumstances identified are not an exhaustive list and can encompass other circumstances such as the Appellant's".
6. Permission to appeal was granted by Upper Tribunal Judge Freeman in a decision dated 13 December 2018 on the basis that:-
" The grounds, based on Khan, Shahbaz (Dishonesty, tax return, paragraph 322(5))  UKUT 384 (IAC) are arguable. That decision came out on 3 May, and the presenting officer should have been in a position to refer the judge to it, though it was not reported till later".
Rule 24 response
7. At the hearing before the Upper Tribunal, Mr Parkin sought to rely on a Rule 24 response. He set out the head note from Khan and submitted that although the existence of a significant discrepancy in an historic tax return did entitle the Respondent to reach adverse suitability findings, it was plainly open to an applicant to rebut that presumption. He submitted that the task for the Tribunal following Khan was to consider the factors set out at  which the judge did at .  of Khan provides:-
" There will be legitimate questions for the Secretary of State to consider in reaching her decision in these cases including (but these are by no means exclusive):
(i) whether the explanation for the error by the accountant is plausible;
(ii) whether the documentation which can be assumed to exist, for example correspondence between the applicant and his accountant at the time of the tax return has been disclosed or there is a plausible explanation for why it is missing;
(iii) why the applicant did not realise that an error had been made because his liability to pay tax was less than he should have expected;
(iv) whether at any stage the applicant has taken steps to remedy the situation and if so when those steps were taken and the explanation for any significant delay ...
(vii) in relation to any of the above matters the Secretary of State is likely to want to see evidence which goes beyond mere assertion: for example in a case such as the present where the explanation is the applicant was distracted by his son, concern for his son's health, there should be documentary evidence about the matter. If there is then the Secretary of State would need to weigh up whether such concern genuinely excuses or explains the failure to account for tax or at least displaces the inference that the applicant is being deceitful/dishonest. The Secretary of State before making her decision should call for the evidence which she considers ought to exist and may draw an unfavourable inference from any failure on the part of the applicant to produce it ."
8. The Rule 24 response further asserted that the Tribunal found the First Claimant's explanation to be plausible, including consideration of appropriate documentary evidence. The Tribunal accepted that he had been self-employed only briefly and thus less likely to know what to expect in terms of taxation and had taken reasonably swift measures to put the situation right. It was submitted that this was very plainly a decision which was in accordance with the judgment in Khan, albeit not referring to it explicitly, and was well-within the range of conclusions open to the Tribunal. It was asserted that the appeal was no more than a mere disagreement with the Tribunal's conclusions and permission to appeal ought not to have been granted.
9. At the hearing before the Upper Tribunal, Ms Aboni sought to rely on the grounds of appeal. She submitted that the judge had failed to give adequate reasons for finding that there were no discrepancies, that it was a matter of record that there were different figures and the First Claimant gave no explanation as to how his accountants had different figures and failed to establish how these came to be submitted. Whilst an accountant may be blamed for an error in a declaration the first Claimant has failed to provide any evidence of contact with his previous accountants or obtain an explanation from them as to the discrepancies and has disregarded that fact when finding that the first Claimant has given a reasonable explanation. She submitted that the first Claimant would have been aware of the errors at an earlier stage because he would have had a reduced tax liability.
10. I put to Ms Aboni the recent judgment of the Court of Appeal in Balajigari  EWCA Civ 673 , as to whether or not this altered the Tribunal's position in Khan. She submitted that this did not materially affect this decision in terms of procedural fairness as the first Claimant had an appeal before the Tribunal and the opportunity to address the issues raised. Ms Aboni maintained that the first Claimant had used dishonesty in one or more of his declarations. Ms Aboni further submitted that the judge relied on the fact that the First Claimant had not been given a penalty by HMRC. However, the fact that there was no penalty did not demonstrate an awareness of discrepancies between the information submitted to HMRC and that submitted to the Secretary of State, nor that his corrected figures did not match what he claimed in his Tier 1 claim to the Home Office. She submitted the judge had failed to give adequate reasons for accepting that the First Claimant had given an explanation that he did not use dishonesty and the judge had erred in finding that the general grounds of refusal should not apply to the First Claimant. She asked that the Decision and Reasons be set aside.
11. In his submissions, Mr Parkin asserted that the Secretary of State's appeal was without merit and amounted to no more than a mere disagreement with the judge's reasoning. He sought to rely on the judge's findings at  where he gave a careful and cogent consideration to the points raised, including the fact that the First Claimant was self-employed for a very short period of time with a clear implication that he had a lack of experience in tax affairs. Mr Parkin submitted there was evidence of bank statements showing payments to the second accountant to make good the tax liability. The judge found it was plausible that the First Claimant did not go back and check his previous returns until he was applying for a mortgage in 2016. The judge heard the First Claimant give evidence and made findings on this evidence and was entitled to make those findings.
12. In respect of the assertion that there was a failure to provide evidence of contact with the accountant the judge dealt with this at  of the decision and there was an e-mail from the Claimant to the previous accountant at page 27 of the bundle and also a payment made to that accountant, Malik Farid, on 26 January 2012 as per the First Claimant's Lloyds Bank statement at pages 28 and at 29; and a copy of an e-mail from the First Claimant to his first accountant asking for the cause of the error in preparing his tax return on 25 January 2012 for the year 2010 to 2011.
13. Mr Parkin submitted the judge was entitled to place weight on this evidence. In respect of the discrepancy in the figures, this was caused by the fact that the tax year runs from April to April and thus the figures submitted to HMRC related to the twelve months, April 2010 to April 2011, and was submitted in January 2012. However, the Tier 1 application relied on the First Claimant's income for the twelve months prior to that application being made, which was of course a different timeframe and thus inevitably the income would be different from that declared to HMRC in respect of the previous tax years. Consequently, Mr Parkin submitted that there was no actual discrepancy in the amended figures prepared by the First Claimant's second accountants and the Tribunal were bound to conclude that there was no inconsistency. Mr Parkin submitted that at  the judge notes the evidence submitted to that effect. Mr Parkin further submitted that the case law had moved on since Khan. In Balajigari one of the issues raised was the failure by the Secretary of State to undertake or make specific dishonesty findings, which was the position here where the Secretary of State had simply noted there was a discrepancy rather than that it was dishonest.
14. In reply Ms Aboni asserted that the judge's decision was very short when one considers the issues involved. His findings amount to only one paragraph and that he did not engage with the evidence relied upon by the Respondent adequately.
Findings and Reasons
15. I reserved my decision, which I now give with my reasons.
16. The judge found as follows at :-
" I have very carefully considered all the evidence and submissions in this appeal. The Respondent has refused the application under paragraph 276B on the basis that the Appellant deceived either HMRC or the Secretary of State in relation to his income in 2011. I have carefully considered the Appellant's explanation and evidence related to this. I take into account that he was self-employed for a very short period and ceased this at the end of the 2010/2011 tax year. I take into account that he had paid an accountant to complete tax returns and there is evidence in his bank statements of this payment. While I accept it is the responsibility of the individual to check his returns, I also acknowledge that not everyone follows this procedure. I also accept that having ceased self-employment at the end of that tax year it is plausible he would not have thought to go back and check previous returns. I also accept that when he made the application for a mortgage in 2016 he would have been required to provide evidence of previous earnings and it was at that stage he realised an error had been made. I note from the documentary evidence that he very quickly instructed another accountant to sort out this error and paid the outstanding tax. On balance I am satisfied that the Appellant has given a truthful explanation for the error in his 2010/2011 tax return and it was not a deliberate or intentional misrepresentation to either the Respondent or HMRC."
17. The judge then directed himself in respect of paragraph 276B(ii)(c) and the Respondent's guidance in respect of Long residence, Version 15.0 which he found at  did not apply and the Home Office guidance in respect of paragraph 322(5), General grounds for refusal Section 4, version 29, published on 11 January 2018 which he found at  would not cover the First Claimant's situation.
18. The judge concluded at :-
" Therefore having considered all the evidence I am satisfied that the Appellant would have met the requirements of paragraph 276B for indefinite leave to remain. However as this is a human rights appeal I must consider whether he would be entitled to leave under Article 8. There is no argument that he can succeed under Appendix FM as neither his wife nor children were British citizens or had settled or protection status and the children were under the age of 7 years. There was also no argument under paragraph 276ADE."
19. The judge then directed himself in respect of Article 8 and Section 117B and concluded at  there was no public interest in refusing his application for ILR and that the appeal should be allowed on human rights grounds
20. I have, when considering whether or not the Judge made a material error of law, taken careful account of the judgment of the Court of Appeal in Balajigari  EWCA Civ 673, which was handed down on 16 April 2019. This concerned four linked judicial review applications, where the underlying refusal by the Secretary of State had been made with regard to paragraph 322(5) of the Immigration Rules due to earnings discrepancies. The Court held at , - as follows:
" 92. The principal substantive consequence of our finding that the refusal of T1GM ILR on paragraph 322 grounds will (typically) engage article 8 is that in any legal challenge the tribunal will be obliged to reach its own conclusion on whether the interference is justified, rather than conducting a rationality review: as to this, see para. 104 below. In an earnings discrepancy case that means, principally, that it will have to decide for itself whether the discrepancy was the result of dishonest conduct by the applicant in the supplying of figures to either HMRC or the Home Office.'
105. The tribunal, as well as the Secretary of State, of course has an obligation to act with procedural fairness. Where the Secretary of State has alleged dishonesty, that will normally require the tribunal - whether the FTT on an appeal, or the UT on a claim for judicial review - to give the claimant an opportunity to adduce evidence in rebuttal; and, given that credibility will be in issue, that will normally include an opportunity to give oral evidence himself or herself and/or call relevant witnesses (e.g. their accountant) to give oral evidence.
106. Each case will depend on its own facts, but, where an earnings discrepancy is relied on (and without changing the burden of proof, which remains on the Secretary of State so far as an allegation that an applicant was dishonest is concerned), it is unlikely that a tribunal will be prepared to accept a mere assertion from an applicant or their accountant that the discrepancy on was simply "a mistake" without a full and particularised explanation of what the mistake was and how it arose."
21. Owing to the fact that the Claimants exercised their right of appeal on human rights grounds, the first Claimant had the opportunity to give oral evidence and to adduce evidence in support of his claim that the discrepancy in his tax return as compared to his Tier 1 application was not the result of dishonesty. The evidence submitted in support of that contention included evidence that the first Claimant instructed an accountant, Malik Fareed, to prepare his January 2012 tax return; payment to him for his service and an email of complaint as to the cause of the error in the submitted tax return: pages 27-29 of the bundle refer. The first Claimant then instructed a different accountant and submitted an amended tax return, which was accurate: pages 26, 30-42 refer.
22. I find that the First tier Tribunal Judge gave careful consideration to the oral evidence of the first Claimant and the supporting documentary evidence and it was open to him to conclude as he did at  that he was satisfied "on balance" that the first Claimant had given a truthful explanation for the error in his 2010/2011 tax return and had not made a deliberate or intentional misrepresentation to either the Respondent or HMRC.
23. Applying the principles set out at  of Khan it is clear that the Judge: (i) accepted that the first Claimant's explanation for the error by the accountant is plausible; (ii) documentation such as correspondence between the applicant and his accountant at the time of the tax return had been disclosed; (iii) the first Claimant did not realise that an error had been made because he had never previously been self-employed and it was only discovered when he decided to apply for a mortgage in 2016; (iv) he then took steps to remedy the situation by instructing a different accountant and submitted a new tax return and (v) provided evidence in support of his assertions. I further find that the Judge's findings are in accordance with the guidance provided by the Court of Appeal in Balajigari.
24. I have concluded that the grounds of appeal, in truth, do not amount to more than a disagreement with the Judge's findings of fact, which were open to him on the evidence and with his reasons, which I find were adequate. In particular, at Ground 2, there is no acknowledgment or engagement in the grounds of appeal with the fact that the relevant time period for assessing the income for the first Claimant's Tier 1 application [£36,226.95] is different from that relating to his tax year [£40,620] therefore, the figures will not match because they relate to different time periods.
25. For the reasons set out above, I find no material error of law in the decision of First tier Tribunal Judge Shanahan, whose decision and reasons are upheld.
26. Notice of Decision
The appeal by the Secretary of State is dismissed.
No anonymity direction is made.
Signed Rebecca Chapman Date 3 June 2019
Deputy Upper Tribunal Judge Chapman