Tax matters in legal disputes – ‘They also serve who only stand and wait’

24 January 2019

My experience of courts and tribunals is similar to that of hospitals – there’s a lot of hanging around.

The most recent waiting experience – attendance for 4 hours for 15 minutes direct involvement – was at an Immigration Tribunal Appeal Hearing. I was there to give evidence on a tax matter, which may not be a subject immediately associated with immigration.

It seems that the Home Office has been rather assertive in its interpretation of paragraph 322(5) of the Immigration Rules. Whilst this is not a usual area of practice for accountants, it seems that the Home Office has been using minor tax indiscretions as grounds for refusing would be immigrants leave to remain in the UK. The paragraph gives a discretionary reason for refusal in the light of a person’s conduct, character or associations, or if the individual represents a threat to national security.

Clearly, tax evasion could cast doubt on a person’s conduct or character and, in the case of large or persistent examples, almost certainly would. However, the sting in the tail of the previous paragraph is the threat to national security, and that puts a more serious context on the earlier words.

I was involved in the case because a forensic report was needed to throw light on the circumstances of a late-filed tax return and some late-paid tax. In the case where I was called, the return was late, four years late, and there was a late payment of tax of less than £1,000. This is, apparently, not atypical of cases that have been brought in recent months. In this case, it was arguable that there wasn’t a requirement to file a return and, certainly, no additional tax liability arose from filing the return.

Most accountants in practice will have experience of returns filed late and tax paid late, whether that’s by design or oversight. Most of us would be satisfied with helping our clients comply and pay their dues. After that, as long as the client fell in line, nothing more would be mentioned and we would not be overly concerned about our client’s conduct or character.

Yet to the Home Office, a small tax error can indicate a character flaw and one seemingly associated with a threat to national security. Accountants should be aware that any client who is involved in an immigration matter may have their tax records minutely scrutinised and should take action to ensure everything is up to date and complete.

As was reported in the national press last year, a number of skilled workers, including doctors and lawyers, have been deported from the UK for errors in their tax records. This may help to explain some of the hanging around I’ve experienced!

Many legal disputes involve financial and taxation matters and often it’s helpful to get the view of a forensic accountant on such matters. If you need assistance in this area please contact me or your local UHY tax adviser.