(Immigration and Asylum Chamber) Appeal Number: HU/05483/2018
THE IMMIGRATION ACTS
Heard at Manchester Decision Promulgated
On 5 th April 2019 On 7 th May 2019
DEPUTY JUDGE UPPER TRIBUNAL FARRELLY
MR NOOR SHAD
(ANONYMITY DIRECTION NOT MADE)
SECRETARY OF STATE FOR THE HOME DEPARTMENT
For the respondent: Mr McVeety, Senior Presenting Officer.
DECISION AND REASONS
1. The appellant is a national of Pakistan, born on a 28 th of April 1979. On 5 th of October 2016 he applied for indefinite leave to remain on the basis of 10 years lawful residence and his article 8 right to private life.
2. His application was considered under 276 B of the immigration rules which requires 10 years continuous lawful residence. There contains a caveat that there must be no reason why it would be undesirable for the applicant to be given indefinite leave to remain, including whether the applicant fell for refusal under the general grounds.
3. His application was refused on 8 February 2018. His application fell for refusal under paragraph 322(5) on the basis it was undesirable be granted leave having regard to his character and conduct. Regard was also had to the provisions of paragraph 276 ADE(1)(vi) and he had not lived here the necessary 20 years and the respondent did not see very significant obstacles to his reintegration into life in Pakistan. No other exceptional circumstances were identified. He did not have any family and so family life was not engaged.
4. The appellant came to the United Kingdom on 18 September 2006. It was accepted he had lived in the United Kingdom for over 10 years at the date of application. His original leave was for the purposes of study and he obtained subsequent leaves on the basis and as a post study migrant. Whilst here he obtained a Master's degree in International business management from Manchester Metropolitan University in 2010.
5. Following his application the appellant consider his immigration history. As part of his Tier 1 leave to remain application of 4 July 2011 he claimed an income of £51,693 from self-employment for the period 1 April 2010 until 31 March 2011. Based on this, he was awarded the necessary 30 points in respect of previous earnings.
6. In a further application made on 25 May 2013 he claimed an income of £51,875 from self-employment for the period 15 May 2012 to 14 May 2013. Again, he was awarded the necessary 30 points under previous earnings.
7. When he made his present application he was asked on 18 May 2017 to complete a tax questionnaire. He returned this, signing the form on 13 June 2017. He indicated there had been a previous need to correct his tax returns. He submitted documents from HMRC which confirmed discrepancies in his declared earnings.
8. The respondent made enquiries with HMRC who confirmed that for the tax year 6 April 2010 to 5 April 2011 his total declared income was £9,693. This was derived from self-employment. For the tax year 6 April 2012 to 5 April 2013 his declared total income was £27,329 from self-employment. Then, for the tax year of 6 April 2013 to 5 April 2014 his declared earnings were £25,094. This again was from self-employment.
9. This raised the question as to whether he had either inflated his earnings to achieve the necessary points when applying for his further visas or alternatively, had undeclared his income to the Revenue. If the figures declared to the Revenue were applied that he would not have been awarded the required points to obtain his further leaves.
10. He had submitted a letter from his current accountants, Qadeer and Co, dated 1 June 2016 stating that in respect of 15 May 2012 to 14 May 2013 his income was £51,875 which was then broken down into £27,329 in respect of the period 15 May 2012 to 5 April 2013 and £24,546 for the much shorter period from 6 April 2013 to 14 May 2013. The respondent questioned the genuineness of earning such a substantial amount in one month. The respondent acknowledged that his Tier 1 earnings fell over 2 tax years but in light of the earlier discrepancy did not accept they were genuine. His tax calculations for 2012/13 give a total income of £27,329 and £25,094 for the tax year 2013 to 14 which included a profit from self-employment of £24,546. Based on the earnings declared to the revenue for 2012 to 13 he would only have received 5 points under the Tier 1 rules and would not have obtained the necessary leave.
11. The appellant blamed his previous accountants, Ali & Co for the irregularities in relation to his tax returns for 2010 to 2011. However, the respondent took the view that it was his responsibility to make an accurate tax return and that he was the one who provided the figures for the accountants. Furthermore, he did not seek to amend the figures for 2010 to 2011 until 1 June 2016, a delay of several years.
The First tier Tribunal
12. His appeal was heard by First-tier Tribunal Judge Herwald at Manchester on 9 November 2018. In a decision promulgated on 28 November 2018 it was dismissed.
13. The judge was referred to the decision of SM and Qadir -v- SSHD (ETS - Evidence - Burden of Proof)  UKUT 229 which related to the question of burden of proof in an appeal relating to personation in English language testing. The appellant's representative conceded that the evidence indicated prima facie deception on the part of the appellant. She submitted that the appellant had addressed this and given an explanation. She submitted that the respondent had not established to the required standard of proof that it should be rejected.
14. She acknowledged that it was the appellant's responsibility rather than his accountants to ensure the information sent to the Revenue was correct. She confirmed that no argument was being put forward in relation to meeting paragraph 276 ADE or in respect of family life.
15. The appellant gave evidence and said he had established a business in 2011 as a business consultant. He instructed a firm of chartered accountants, Ali and Co to prepare his own accounts. He claimed a discrepancy in respect of the returns to the Revenue arose because the accountant submitted claims for excessive expenses. He said the following year he changed to another firm of accountants, Qadeer and Co, but they under declared his profits. He attributed this to them using figures supplied by his original accountants. He then stated that in June 2016 they undertook a review of his accounts at his request in anticipation of his application for leave to remain. It was then he claimed that the discrepancies came to light.
16. First-tier Tribunal Judge Herwald set out the findings made at paragraph 18 of the decision under subheadings (a) -(w). The judge at (b) stated that the appellant's representative had conceded it was the appellant's personal responsibility to check his tax return. The judge also stated there had been no argument on behalf of the appellant that he could still succeed if he had engaged in deception. The judge then went on to consider the appellant's explanation and rejected it.
17. The judge rejected the appellant's claim that he did not understand the British tax system, particularly as he was engaged in advising others in business. The judge rejected his claim that he was unaware he was paying too little tax. The judge also rejected the appellant's claim he had not received a copy of the draft tax return for confirmation before it submission. The appellant claimed his accountant gave him the figures over the telephone which the judge did not accept. The judge noted that the appellant had not reported his accountants to their professional body. The judge concluded the appellant had misled the Revenue to avoid paying tax. Regarding the years spanning 2012 /2013 the judge rejected the appellant's claim that he nearly earned as much from self-employment for one month in 2013/2014 as in the previous 11 months. The appellant's explanation was that this income covered the completion of projects began earlier.
The Upper Tribunal
18. Application for permission to appeal was made on a number of grounds which were rejected by a judge of the First-tier Tribunal. On a renewed application to the Upper Tribunal permission was granted on the basis it was arguable the judge may have erred in relation to the correct burden of proof applicable. Reference was made to the 1 st ground of the application.
19. The 1 st ground suggested there were several instances where the judge failed to apply the correct standard of proof. It was acknowledged that the respondent had satisfied the initial burden because of the discrepancies between the figures used in the student Visa applications and the returns to the Revenue. It was then for the appellant to provide an innocent explanation. The grounds contended that this needed to be considered against a minimum level of plausibility. The grounds address the question of dishonesty. Reference was made to the decision of R (on the application of Addas) v SSHD  EWHC 78 at paragraph 7. This referred to the legal burden on the Secretary of State to lay sufficient evidence to raise the issue of fraud. There was a burden upon applicant to show an innocent explanation satisfying the minimum level of plausibility. If this is done and the respondent must establish on the balance of probabilities that this innocent explanation can be rejected.
20. The grounds then seek to detail instances in the decision where the judge failed to consider the appellant's explanation against the minimum level of plausibility. Reference is made to paragraph 18(o) of the decision whereby the judge referred to his `surprise' at the appellant's claim that he had not received a copy of the proposed tax return from Ali and Co rejected the claim the details of the tax return have been relayed over the telephone as the appellant claimed. The grounds suggest the judge failed to distinguish between carelessness and dishonesty and that the judge had erred in applying the minimum level of plausibility test.
21. References then made to paragraph 18(r) the judge referred to the appellant's attempt to blame his accountant notwithstanding the earlier submission made by his representative that the responsibility lay with the appellant. The grounds again maintain this was not sufficient to conclude the appellant was dishonest.
22. Finally, paragraph 18(s) is referred to, whereby the appellant had referred to health issues and the judge's reference to the absence of evidence that this could have led him to mislead the revenue. The grounds contend that the judge failed to provide sufficient reasons for rejecting this explanation.
23. The grounds were advance under the heading 'failure to properly consider the appellant's evidence or give sufficient reasons'(Ground 2).this again alluded to the health argument as well as the claim that in respect of the later period the monies related to earlier work done. The other ground argued making irrational findings (Ground 3). This related to the judge's rejection of the appellant's claim he did not understand the tax system given that he was engaged as a business adviser.
24. At hearing, Mr Gajjar relied upon the grounds for which permission had been granted. His argument centred upon the need to show dishonesty rather than carelessness. In this context he said the initial concession by Counsel of a case to answer was not also a concession on the dishonesty.
25. I was referred to the decision of R (on the application of Khan) v SSHD (dishonesty, tax return, paragraph 322(5)  UKUT 384 and also the decisions of Mr Justice Collins in R (on the application of Samant) JR/6546/2016 and the decision of Upper Tribunal Judge Canavan in R (on the application of Shaik) JR/8324/2017.In respect of Samant I was referred to paragraph 10 wherein it is stated is necessary to establish that an incorrect tax return was lodged deliberately rather than through a mistake or as a result of poor advice. I was referred to paragraph 34 of the decision in R (on the application of Khan) v SSHD where it was stated:
`... It is too broad or extreme a proposition to suggest that it cannot be an offence for a person who has been refused ILR pursuant to paragraph 322(5) on the basis of a discrepancy between his tax return and a previous application for leave to remain to say that his accountant or agent was responsible for the discrepancy on the basis that each person is personally responsible for his or her own tax matters and dealings with HMRC.... It seems to me that an error by an accountant may afford a reason for an applicant shall that he has not been dishonest but, at most, careless...'
26. Mr Gajjar distinguished the personal responsibility upon the taxpayer to make the correct return from an individual making a dishonest return. He then returned to the appellant's account that his former accountant relayed the details of his proposed tax return over the telephone. He submitted that just because something was surprising at by the judge did not mean it fell below the minimum level of plausibility. He referred to the comment by the judge at paragraph 18(o) that he found it highly unusual that an accountant would not forward a copy of the draft tax return to the customer, for confirmation, before submitting the same to HMRC. Mr Gajjar again said the issue was not whether something was highly unusual or surprising but whether it was dishonest. He submitted the correct test was whether the explanation was so implausible that it could not have happened.
27. I was referred to paragraph 18 are of the decision with the judge recorded the appellant continued to blame his accountant. Mr Gajjar submitted again that the judge failed to distinguish between a breach of responsibility and deception.
28. Moving onto the other grounds, he suggested the judge failed to give adequate reasons. For instance at paragraph 18(l) the judge referred to a series of discrepancies in the appellant's account but only gives an example of one. I was referred to paragraph 18(k) where the judge did not find it credible that the appellant, engaged in advising others on how to improve their business with the suggestion this included tax affairs, he could have no understanding of the British tax system.in the appellant's statement he said he acted as a business consultancy but makes no reference to being a tax adviser.
29. I was then referred to the judge's comments about the considerable income produced over a short period and the absence of an explanation. Mr Gajjar submitted that the appellant had given an explanation at paragraph 20 of his statement.
30. By way of response, Mr McVeety referred me to the rationale of R (on the application of Khan) v SSHD whereby it was inadequate for the appellant simply place the blame at the doorstep of his accountant. He submitted this was exactly what the appellant was seeking to do. He said there was no evidence the appellant had done anything to demonstrate that the fault lay with the accountant. He submitted the judge was entitled on the balance of probabilities to reject a claim such as that made by the appellant that he was given details of his tax return over the phone; that he never read the completed draft and simply accepted what the accountant told him. He said it was not credible that the appellant who was advising other businesses could not be bothered to check his own tax return notwithstanding a lack of expertise in tax. He said there was no evidence that the appellant so neglected the running of his own business.
31. In response, Mr Gajjar said the appellant had not simply sought to lay the blame with the accountant. They had discussed the figures over the phone. The 1 st period concerned his 1 st year of trading and so we had no comparators which would have warned him that the tax bill was too low. At its very height the appellant was careless rather than dishonest. Regarding the 2 nd period issue he submitted that the judge failed to make proper findings on the explanation that this related to accrued earnings. I was referred at paragraph 32 of R (of the application of Shaik) where Upper Tribunal Judge Canavan made the point that a single mistake in the 1 st tax return might be viewed differently from a series of mistakes when the explanation will become less and less plausible. He referred to the judge using phraseology such as `highly unusual' or `unusual 'rather than `highly unlikely'.
32. A burden of proof and the standard of proof in an appeal are not matters of mathematical certainty but are concepts which require an assessment of the evidence presented. Paragraph 322(5) of the immigration rules provides that leave to remain should normally be refused based on `the undesirability of permitting the person concerned to remain in the United Kingdom in the light of his conduct etc...'
33. In the present appeal there is no dispute that when the declared income to the Revenue was compared with that used to obtain the necessary points for further leave to remain there was a significant disparity. Furthermore, that disparity operated to the appellant's advantage in that the figures declared to the Revenue were less than they actually where, meaning he did not pay his full tax liability.
34. The appellant claims that the discrepancy came to light after he asked his accountant to review his returns for the past 5 years in anticipation of his application for leave to remain. Matters have been resolved with the Revenue and no penalty has been imposed. Payments have had to be made to meet the shortfall. As part of the normal process following an application for leave to remain the respondent sent the appellant a questionnaire in relation to his tax liabilities. In light of this and the discrepancies were revealed and his application was refused under paragraph 322(5).
35. There has been guidance in the case law at the applicable principles in such matters. The 1 st point relates to burdens of proof. The guiding case is that of R (on the application of Khan) -v- SSHD. The 1 st point is that where there has been a significant difference between the income claimed in a previous application for leave to remain and the income declared to the Revenue the respondent is entitled to draw an inference that the applicant has been dishonest and falls for refusal under paragraph 322(5).
36. It is accepted in the present appeal that there was a significant difference between the income declared to the Revenue and that used in previous applications for leave to remain under the points system. In the First-tier Tribunal the appellant's representative conceded this. This matter however is only the beginning for a decision to be made under paragraph 322(5).
37. The inference is rebutted where there is a plausible explanation for the discrepancy. R (on the application of Khan) -v- SSHD makes the point that the enquiry is whether the person was careless rather than dishonest. The issue is whether the explanation and evidence is sufficient to displace the primary inference of dishonesty. Obviously, there can be a myriad of explanations. The decision went on to say that a finding that the person has been dishonest in relation to their tax affairs is a very serious finding with serious consequences. Therefore, although the standard of proof is the balance of probabilities this must be borne in mind. The case also advised that to blame the accountant in relation to a historical tax return is not the end of the matter. This is because the accountant will have or should have asked the taxpayer to confirm the return was accurate. The applicant will also have an awareness, dependent upon their earnings, of a tax liability.
38. In considering the question of dishonesty the question of a tax expectation and remedial steps would be relevant. It follows there is a crucial distinction between someone who is dishonest from someone who is careless. The case guides that in determining which side the person falls then regard is to be had as to whether the explanation for the error by the accountant is plausible. Regard can also be had to the correspondence between the individual and their accountant and whether an applicant should have realised something was wrong. Associated with this is consideration of the steps they took to remedy the situation, including the question of any delay. Within this guidance there are further refinements. For instance, an error by an accountant may for a reason for an applicant to show they have not been dishonest. There is no rule of strict liability upon an applicant.
39. Ultimately, I am considering whether there is a material error in the decision of First-tier Tribunal Judge Herwald. Mr Gajjar has skilfully dissected the decision and I have attempted to set this out above. Meaning no disservice to the points argued, ultimately the thrust was that the appellant had given a plausible explanation to the effect that at most he was careless and not dishonest. Therefore, he argues the judge erred in dismissing his appeal as he had displaced the prima facie evidence of dishonesty.
40. Without rehearsing the decision of First-tier Tribunal Judge Herwald again I would refer to the points made at paragraphs 18(f) to (w). I find they indicate the judge correctly understood the issues and the changing burdens of proof. There was an adequate basis for the judge's conclusions of dishonesty.
41. Mr Gajjar has suggested that reference by the judge to being `surprised' and so forth was the wrong test. However, I do not find the use of such expressions indicate any error on the part of the judge.
42. Insofar as submissions made are concerned I prefer those of Mr McVeety. The appellant is highly educated and was employed advising businesses. Whilst he is not an accountant it is reasonable to infer he has some understanding of tax liabilities. The same can be really be expected of any earner. The judge did not find he had demonstrated an innocent explanation. His actions were not dismissed as mere carelessness.
43. There were two separate incidents where there was disparity between the figures to the Revenue and to the respondent. Notably, this was not the situation where the disparity was to the appellant's detriment. The two occasions involved two separate firms of chartered accountants. The explanation for the error by the 2 nd accountant was that they adopted the figures given by the 1 st. No complaint was made to the professional body. Furthermore, there was no attempt at remedial action on the part of the appellant until he appreciated his tax affairs would be relevant to the present application. The fact no penalty was imposed by the Revenue is not the issue.
44. The appellant seeks to blame his first accountant. I accept in certain situations of an accountant's fault can exonerate an individual. However, he did not demonstrate this to the judge. His explanation was that the 1 st accountant relayed the figures relating to his tax liability over the telephone and assured him everything was in order. The returns were made online so this did not necessitate his signature. Nevertheless, it was open to the judge to reject this claim.
45. Judgement was given in Balajigari v The Secretary of State for the Home Department  EWCA Civ 673 on 16 th April 2019. Having considered the decision I did not feel it necessary to recall the parties for comment. Paragraph 4 of the decision states that the Home Office became concerned that there was a widespread practice of applicants for leave to remain as a T1GM claiming falsely inflated earnings, particularly from self-employment. From 2015 the Secretary of State began to make use of powers under section 40 of the UK Borders and Immigration Act 2007 to obtain information from Her Majesty's Revenue and Customs about the earnings declared by applicants in their tax returns covering the equivalent period. This information disclosed significant discrepancies in a large number of cases and reference was made to the common occurrence of applicants then submitting amended tax returns. The decision refers to arguments on appeal distinguishing between dishonesty and carelessness. The Court of Appeal emphasised the need to establish dishonesty.
46. In the individual cases the Court of Appeal found the decision-making process was flawed because the Secretary of State 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. The Court went on to say that those defects need not lead to a paragraph 322 (5) refusal being quashed if the Upper Tribunal is satisfied that they are immaterial. It is my conclusion this is the situation in the present appeal. The refusal letter does indicate representations were made.
No material error of law has been established in the decision of First-tier Tribunal Judge Herwald. Consequently, that decision dismissing the appeal shall stand.
Deputy Upper Tribunal Judge Farrelly.
Date 03 May 2019