Courts emphasise importance of precision and adherence to rules in Business Immigration applications

12 June 2019

Two recent cases highlighting the unforgiving nature of errors in Points Based System immigration applications have emerged recently.

Firstly, the case of R (Sajjad) v SSHD [2019] EWCA Civ 720 concerned a Tier 1 (Entrepreneur) who had been in the UK since 2011. In 2015 he submitted an application to extend his visa with his wife and 3 children as dependents.

The application was initially refused on a number of grounds, all but one of which were abandoned by the Home Office following various proceedings of challenge. The remaining ground of refusal centred on the way the applicant invested money into his business.

Applicants in this category are required to invest £200,000 into their business or a business they join. Mr Sajjad had transferred £495,470 of his own money to his company and to creditors of the company. He provided the companies unaudited financial statements and corroborating letters from his accountant one of which stated:

"…All the money in the Director’s Current Account is an investment to run the business of Blanco, in legal terms it is considered as loan to the company without interest for an indefinite period. Loan agreement is not required but can be provided for this arrangement…."

The evidence suggested that the investment was a loan rather than a direct cash investment, but Mr Sajjad had entered the words “not applicable” in a section of the application form headed “legal agreement (for director’s loans only)”.

In refusing the application, the Home Office concluded that the method of investment was a director’s loan and relied on the fact that no director’s loan agreement had been provided, which is a requirement under paragraph 46-SD(a)(iii) of the rules.

Mr Sajjad attempted to argue that, firstly, the investment was not director’s loan but was rather a direct cash investment, and secondly, even if it was a director’s loan, it was clear that the investment had been genuine in nature and the Home Office should have exercised its discretion in his favour and allowed the application.

The Court of Appeal disagreed on both counts, confirming that that the investment was considered to be a director’s loan, and that paragraph 46-SD(a)(iii) duly applied. Although it was not disputed that Mr Sajjad had genuinely invested over twice the required amount of money in his business, the Court emphasised that under the Points Based System, the perceived advantages of certainty and efficiency will from time to time produce results in individual cases which may seem harsh.

The second case of R (Khajuria) v SSHD [2019] EWHC 1226 was about a Tier 1 (Entrepreneur) migrant who had been in the UK since 2009, initially as a Tier 4 (General) student and then a Tier 1 (Post Study Work) migrant.

Whilst Mrs Khajuria had been a Tier 1 (Post Study Work) migrant, she joined a business called Rose Hotel and Spa Ltd on 11 December 2013. Her application for leave to remain as a Tier 1 (Entrepreneur) was granted in 2014 valid until 2017. Her extension application was refused in July 2018.

Amongst other things, applicants in this category must demonstrate that they have created at least two full time jobs lasting 12 months each during their initial period of leave to remain.

The Home Office refused the application because Mrs Khajuria had not provided printouts of Real Time Information (RTI) submissions made to HMRC for the employees.

In October 2013, RTI became the acceptable method for reporting tax payments in Tier 1 (Entrepreneur) applications and must be provided under paragraph 46-SD(h)(i) of Appendix A to the Immigration Rules. The Home Office had accordingly awarded no points to Mrs Khajuria for “Creation of jobs in the UK” and, as she had insufficient qualifying points, refused her application.

Mrs Khajuria did not have RTI submissions as, prior to this on 14 April 2013, the business had closed its PAYE scheme following a change in the law which had come into effect 6 April 2013. This was on the advice of Financial Accountants, Ashworth Billington Ltd.

In a statement dated 7 June 2018, Mr T Clow of Ashworth Billington explained that advice by reference to HMRC Guidance which stated:

"Introduction to PAYE

As an employer, you normally have to operate PAYE as part of your payroll. PAYE is HM Revenue and Customs’ (HMRC) system to collect Income Tax and National Insurance from employment.

You don’t need to register for PAYE if none of your employees are paid £116 or more per week, get expenses or benefits, have another job or get a pension. However you must keep payroll records.”

Mr Clow said that all of the employees of Rose Hotel & Spa Ltd were in sole employment and paid less than £116 per week, therefore the PAYE scheme was closed down and there was no obligation on the company to file Real Time Information (RTI) to HMRC.

Mrs Khajuria sought Judicial Review of the decision on two grounds. The first ground argued that paragraph 46-SD(h)(i), which required RTI submissions, was “partial and unequal” in its operation between different classes – i.e. applicants who operate businesses that are required by HMRC to operate RTI and those that do not – and is therefore unlawful.

The second ground argued that the Home Office had failed to consider the reasons why Mrs Khajuria had failed to provide the requisite evidence (which had been fully set out in a cover letter accompanying the application), and whether such circumstances warranted departure from the rules and an exercise of discretion in her favour.

The Court rejected the first ground and the argument that paragraph 46-SD(h)(i) was unlawful, noting that although it operated in such a way that meant Mrs Khujaria could not meet it, this did not itself make the rule was unlawful.

The court referred to the judgement of Bennet LJ in Kaur v Secretary of State for the Home Department [2015] EWCA Civ 13 that the Points Based System “is designed to achieve predictability, administrative simplicity and certainty” and “it does so at the expense of discretion that is to say it is prescriptive”.

The second ground was also rejected. The Court accepted the Home Office’s argument that where an applicant cannot meet the strict evidential requirements of the Immigration Rules, an application for discretionary leave to remain outside the rules can be made, for which there is a specific form and specific fee.

It was open to Mrs Khujaria to make such an application, but the fact that she had not done so meant that the Home Office was fully entitled not to consider discretionary leave outside the rules.

In both these cases, it was not disputed that the applicants had in reality complied with the practical spirit of the Immigration Rules. Mr Sajjad had genuinely invested over the required amount into his business and Mrs Khujaria had genuinely created the full time jobs required.

The decisions are harsh but not surprising, and emphasise the importance of ensuring all specified evidential requirements are met in Points Based System applications. Sullivan LJ said in Alam v SSHD [2012] EWCA Civ 960 that “The price of securing consistency and predictability is a lack of flexibility which may result in ‘hard’ decisions in individual cases”.

By Hesham Shoeb

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