Shahbaz Khan, R (on the application of) v The Secretary of State for the Home Department

A substantial mismatch between earnings declared for immigration purposes and those declared to HMRC permits an initial inference of dishonesty under paragraph 322(5) of the Immigration Rules. The inference is not conclusive.

Where an applicant presents evidence that the discrepancy resulted from carelessness, including an accountant’s error, the Secretary of State must fairly decide whether the evidence displaces the inference. The standard remains the balance of probabilities, but the gravity of a dishonesty finding requires cogent and strong evidence.

The decision-maker must address the evidence on both sides. Relevant matters include the plausibility and support for an accountant-error explanation, the applicant’s expected awareness of tax liability, and any corrective action or delay. A decision based merely on lack of reasonable care, an incorrect chronology, or a reversal of the fact-finding burden is unlawful.

The applicant sought judicial review of the Secretary of State’s refusal of his application for indefinite leave to remain as a Tier 1 (General) migrant. The refusal under paragraph 322(5) of the Immigration Rules arose from a large difference between earnings claimed in a 2012 leave application and earnings originally declared to HMRC for the corresponding tax year.

The applicant’s accountants later submitted an amended return and accepted responsibility for an asserted clerical and software error. The Secretary of State maintained that the applicant should have ensured the accuracy of the return and that the amendment did not dispel concerns of dishonesty. Administrative review upheld the decision.

The central issue was whether the Secretary of State had lawfully and rationally found dishonesty, rather than mere carelessness, when applying paragraph 322(5).

1. Application for judicial review allowed. The Upper Tribunal quashed the refusal decision of 19 January 2017 and the administrative-review decision of 2 March 2017. They were not reached through a lawful approach to the required fact-finding exercise.

2. A significant difference between income claimed in an earlier leave application and income declared to HMRC entitled the Secretary of State to infer deceit or dishonesty for paragraph 322(5) purposes. In the absence of a plausible explanation, that inference could justify refusal of settlement. Once evidence was advanced that the discrepancy was due to carelessness rather than dishonesty, however, the Secretary of State had to decide fairly whether it displaced the prima facie inference.

3. The standard was the balance of probabilities. Yet dishonesty in tax affairs, resulting in refusal of settlement, is a serious finding with serious consequences. It therefore required cogent and strong evidence. An accountant’s admission of error was not decisive: the Secretary of State could consider the taxpayer’s knowledge of earnings, expectation of tax liability, obligation to verify and sign returns, supporting documents, and the timing of remedial action. She had to consider evidence in both directions and give reasons.

4. The Secretary of State’s reasoning was flawed. It did not state that the accountants’ letter was disbelieved; it treated failure to take reasonable care as if it established dishonesty; it incorrectly said that the return had been amended only after an earlier refusal; and it reversed the fact-finding burden by requiring the applicant to satisfy her that he had not been dishonest. The administrative-review reasoning compounded that error by asserting that no burden lay on the Secretary of State.

5. Relief was not refused under section 31 of the Senior Courts Act 1981. The Tribunal could not substitute its own assessment and conclude that a properly directed decision-maker would highly likely have made the same decision.

• Upper Tribunal (Immigration and Asylum Chamber): judicial review allowed. The decisions of 19 January 2017 and 2 March 2017 refusing indefinite leave to remain were quashed.
• Secretary of State: refused indefinite leave to remain under paragraph 322(5) of the Immigration Rules on 19 January 2017. Administrative review maintained that refusal on 2 March 2017.