The effect of debts on immigration and nationality applications
A long-form article for advisers
Debt is commonplace in modern Britain and migrants are just as likely to be affected. The hostile environment, lack of recourse to public funds and, for refugees, past periods on low income through asylum support whilst waiting for a decision, and the legacy of the pandemic can make it worse.
It is important to know when a client’s debt may stop them successfully applying for permission to stay in the UK or naturalising as a British Citizen. If advising a client on an immigration or nationality application you will need to know which debts could be a problem.
For debt advisers with a client subject to immigration control, it might affect which debts your client may need to prioritise because of the impact on immigration applications. The adviser also needs to be aware of the immigration implications of advice especially on a Debt Relief Order or on bankruptcy.
The FCA’s rules in the Consumer Credit Sourcebook (CONC) say advisers must give advice that ‘has regard to the best interests of the customer’ and ‘is appropriate to the individual circumstances of the customer.’ Advisers also need to point out ‘the actual or potential advantages and disadvantages of each option available to the customer…’ Clearly then, we need to be aware of the implications for immigration issues in order to comply with the rules.
Can I advise where there is an immigration issue?
Some debt advisers may be worried, and want to know if they are allowed to give advice where there is an immigration issue arising from a debt. Advising a client on an immigration or nationality applications is advice regulated by the Office of the Immigration Services Commissioner.
Advising a client on how to deal with a debt in the light of their immigration status is not regulated immigration advice. Nor would telling the client that a debt might have consequences for an immigration application so they should take specialist advice.
Going further — to give advice on the the risk of refusal, or the steps to be taken in such an application — would be basic immigration advice at level 1. All advisers in Citizens Advice who have completed the immigration training, are able to give immigration advice at level 1. Only if it became more complex — for instance where they couldn’t satisfy the rules or had already been refused — would it go above level 1.
Nationality applications
Once a foreign national has permission to stay permanently in the UK they may wish to apply for British Citizenship. For adults this process is called naturalisation.
Whether debts are likely to stop a client naturalising depends on the Home Office guidance on ‘Good Character’. You should presume that the Home Office will find out about debts through their routine checks for the application of other government departments and public records.
Certainly, if the client owes tax or national insurance contributions to HMRC, or a debt of more than £500 to an NHS Trust, then that can be used as grounds for refusal in itself. NHS debts are usually for hospital treatment that was chargeable under the NHS (Charges to Overseas Visitors) Regulations because the client did not have the right immigration status when treatment began. Theoretically, it might include a debt for treatment by a local authority exercising public health duties, but I have never encountered this. Debts to the NHS Business Authority — for instance for wrongly claiming free prescriptions, glasses or dental treatment — are not included, and have no special status.
The attitude to debts short of bankruptcy is that “where a person deliberately and recklessly builds up debts and there is no evidence of a serious intention to pay them off, the application will normally be refused.”
I take this as meaning the debts have to be built up at least recklessly. If acquired in the normal course of life with a reasonable belief they could be paid off, then they are not reckless. If not built up deliberately and recklessly then the failure to have a serious intention to pay them off should arguably not affect the applicant’s good character.
That intention to pay off the debt is relevant to a Debt Relief Order (DRO). If the debt is built up recklessly and deliberately then a DRO would prevent an applicant from showing to the Home Office that they had a serious intention of paying off their debts. Bankruptcy, and an individual voluntary arrangement (IVA) where part of the debt was to be written off, might also indicate this, though the latter might go down better if it had to be argued with the Home Office.
A Breathing Space moratorium, however, is not a payment break and is unlikely to show a lack of ‘serious intention’ to pay off debts. A client may continue to pay their debts whilst in the 60–day moratorium if they are able to. It protects the debtor from any new creditor bankruptcy petitions or county court judgments so could even lower the visibility of debts. The same would apply during a mental health crisis moratorium, during the crisis treatment and for 30 days thereafter.
If the debts were not built up both recklessly and deliberately then a DRO, or an IVA, ought not to be a problem. We are aware of instances where both recent and discharged orders have been declared and the applications have been successful. If intending to apply for citizenship it would still be advisable to include extra information explaining how the indebtedness arose and that it was not reckless.
Additionally, outstanding fines - whilst not mentioned in the guidance - could indicate a criminal record that would prevent naturalisation if levied for offences in the last 3 years.
For Scotland ‘fiscal fines’ are regarded as an out of court disposal that is not a criminal record and will be ignored for a nationality application. A ‘caution’ (in Scotland this is like a bond for good behaviour) will be treated as part of the criminal record.
A debt adviser should also be alert to, for instance, a benefits repayment where the benefit was claimed in breach of a no recourse condition. This, unless made mistakenly, can prevent naturalisation by being a ‘deceitful or dishonest dealing with Her Majesty’s Government’.
Bankruptcy and being a director of a Company in liquidation are both treated more seriously in the Good Character policy. This may prevent naturalisation unless the discharge or liquidation was over 10 years ago, or where the order was annulled or it was a foreign bankruptcy.
Even then, the Home Office will look at other factors such as the economic circumstances at the time, the scale of debt, culpability in the liquidation, mitigating circumstances and whether the applicant was reckless and irresponsible.
The guidance concludes that
“where the person was made bankrupt or their company went into liquidation through little or no fault of their own, the application will not normally be refused. For example, they may have simply been a victim of the poor business decisions of others or their business has been severely affected by an economic downturn.”
In essence, it will be decided on the facts of the case. The debt adviser would tell the client about the risk of refusal but the adviser on the nationality application will need to submit evidence regarding the circumstances of the bankruptcy.
Court fines, fixed penalty notices and penalty charges
Magistrate court fines are criminal convictions. The existence of them - past or present - may be a reason for refusal if they are convictions within the last 3 years, or there are multiple convictions.
Fixed penalty notices (FPNs) are also issued for criminal matters like breaching covid restrictions or littering. As an alternative to a conviction, they will not usually lead to refusal of a nationality application. However, failure to pay one may lead to a subsequent conviction, in which case the guidance related to fines applies. Again, multiple FPNs may show a disregard for the law and lead to refusal on character grounds.
Penalty Charge Notices (PCNs) are a civil sanction usually for parking or bus lane contraventions, so there is no conviction. The guidance is silent on the effect of multiple PCNs, so these appear lower risk.
As with any type of debt, there could still be a risk if it appears debt was built up recklessly with no intention to repay. Multiple fines, FPNs or PCNs could appear reckless and carry a greater risk of refusal.
Immigration applications
Good character and debts are not treated the same way in immigration applications as in the nationality guidance. Debt Relief Orders and bankruptcy are not specifically mentioned as grounds for refusing an application for a visa or leave to remain. Debts to the NHS have a special status.
NHS debts and litigation debts
Again, debts to a relevant NHS body that total over £500 are grounds under the Immigration Rules for refusal of most immigration applications —paragraphs 320(22) and 322(12), and also para 3.14 of Appendix V. For family applications under Appendix FM, it’s paragraphs S-EC.3.2, S-LTR.4.5, and S-ILR.4.5.
If the debts were incurred after 1 November 2011 but before 5 April 2016 then £1,000 is allowed. Debts from before 1 November 2011 cannot be used against the applicant.
Applications can also be refused if the applicant has any litigation debts to the Home Office - for instance an award of Home Office costs against them in an unsuccessful judicial review. There is guidance on when a litigation debt may be overlooked — for instance when a client is on benefits and a fee waiver for the application fees has been granted.
If the Home Office were aware of the NHS debt before the leave was first granted then their practice is not to use this to refuse an extension of the same type of leave unless, for instance, an arrangement to pay has broken down.
Following the case of MXK v SSHD, it is not lawful to detain or refuse entry to passengers with permission to stay, but who have NHS debts, when they re-enter UK. Border force guidance now confirms that they cannot have their leave cancelled because of an NHS Debt or be refused re-entry to the UK. The discretion to refuse entry to someone without leave - for instance a visitor - remains.
These debts will not lead to a refusal of asylum and protection applications. They would not lead to an outright refusal in human rights applications outside the Immigration Rules, but could conceivably be a factor in whether a refusal would be proportionate. They will also lead to a refusal of an indefinite leave application of leave to remain on family or private life grounds, though further limited leave would probably be given instead.
The adviser may want to check first whether the hospital or other NHS body is correct to hold the client liable and that the invoice does not exceed one and a half times the National Tariff amounts for each item of treatment. The rules for which overseas visitors are liable for NHS charges differ in Scotland, Wales and Northern Ireland.
If the client is liable, debt advisers should treat NHS debts as priority debts for applicants subject to immigration control because of the risk of sanctions. Obviously, if your client is unable to obtain or extend their permission to stay in the UK they will be unable to legally work or claim benefits. They will thus have a reduced income and will be less able to service all their debts. It should therefore be accepted as appropriate by other creditors.
I know that some Citizens Advice have successfully included a foreign national’s NHS debts in Debt Relief Orders, but it is not known whether that debt is then disregarded in an immigration application. The Rules say “failure to pay a [NHS] charge” is the reason for refusal rather than liability to pay. The failure to pay is not removed by the DRO. Additionally, even if an NHS body writes off the debt for accounting purposes the guidance states “it remains in the relevant body’s records and can be recovered if the patient’s ability to pay changes” (para 13.67 of the English charging guidance). An adviser should therefore include a ‘written off’ debt in the DRO application, absent tactical decisions on whether the total debts might then exceed the £30,000 limit.
Applications are not refused if there is an arrangement to repay the NHS debt . The Home Office learn of the debt when it is entered on a shared portal by the NHS body, but the English charging guidance (page 132) confirms that there is no obligation to inform the Home Office of the debt where there is already a‘sensible’ arrangement. So, where agreements to pay by instalments are made and observed, this may avoid immigration sanctions.
Where there is such an arrangement or the debt is cancelled then the NHS body does not have to advise the Home Office of the debt. The answer may therefore be to ask the NHS body to withdraw the debt from the portal if they either accept a new arrangement to pay, or when it is paid off, or at the end of DRO period. The client should be advised to keep all the proof that they have paid or discharged this debt in case it’s required for an immigration application.
Conducive to the public good
Applications for visas or leave to remain can be refused by the Home Office if the presence of the applicant in the UK is not ‘conducive to the public good’. Debt does not fulfil the definition of this in Home Office guidance and does not fall under any of the examples given in the guidance.
Sponsorship and Adequate maintenance
Some applications for a visa or leave to remain in the UK will be refused unless it can be shown that the applicant can be maintained — that is supported financially — and housed adequately without claiming public funds. ‘Adequately’ is defined as the applicant (and their family unit) being above income support levels after payment of housing costs.
If servicing the debts meant that the applicant could not be adequately maintained and accommodated at these levels then the application might be refused. The debts could be either those of the applicant or of their sponsor, if their support was needed to satisfy the relevant rules.
EEA and EU Settlement Scheme applications
Applications for settled or pre-settled status from EU Citizens and their family members cannot be refused on the basis of debts. Debt is not included as a reason for refusal in either the ‘suitability’ provisions in para EU15–17 of Appendix EU of the immigration rules nor in the limited provisions of part 9 of the Rules that apply to these applications. Thus, no insolvency solution will put their status at risk.
A complicating factor — no permission to stay, no bank account!
In November 2022 the Prime Minister announced the resumption of the requirement for banks and building societies to check that current account holders were not disqualified from holding a bank account because of their immigration status.
A person is not able to open (or continue to hold) a bank account if they’re in the UK and require leave to enter or remain, but don’t have it. This can affect illegal entrants, people on immigration bail, and overstayers — including those who miss the deadline for applying to extend their current leave.
Guidance to banks was issued on 10 March 2023 re-starting the checks.
The checks are conducted on existing bank accounts as well as new ones, and banks can initiate a search for a match. The account must be closed if it’s a ‘3-point match’. This is where the name, date of birth, and at least one of the contact details for that person; namely either an address, telephone number or email address, corresponds to Home Office records.
With accounts that are already open, the Home Office may apply for a freezing order, but can make provision for the disqualified person to meet his or her reasonable living or legal expenses. It may also allow an individual who is not disqualified to make withdrawals or payments from the account.
Advisers can
- look out for cases of clients refused bank accounts or having their accounts wrongly closed
- in the case of joint accounts, ensure that the other holder — often a partner — can access the account
- assist such clients to show their immigration status to the bank, if wrongly matched, and ask the bank to raise this with the Home Office
- help clients complete the Home Office form for checking an immigration status is correct
- if an error is not corrected, assist the client to raise this through the Home Office complaints system — email complaints@homeoffice.gov.uk
- identify cases where the the Home Office can be asked to postpone the closure, or permit a term of the freezing order allowing debts to be recovered. They can also include a term allowing withdrawals for the holder’s subsistence where closure would leave the holder without the means to support themselves
- write to creditors to explain the situation and enclosing a copy of the freezing order or correspondence. Ask for a hold on recovery action because the client will have lost their ability to make payments. It may help to tell the creditor about any change of circumstances on the horizon, for instance an application by the client to regularise their immigration status, which could mean the issue is temporary.
Because a client without leave also loses the right to lawfully work and claim public funds, their income and ability to service debts may disappear at the same time. Debt advisers should:
- re-examine the current debt solutions
- negotiate moratoriums on payments. Breathing Space is available if they are ‘ordinarily resident’, which is not defined by immigration status
- look at any steps the client can take to avoid destitution, including sources which are not ‘recourse to public funds’. If the client has children now ‘in need’ this may include local authority support under section 17 of the Children Act.
Dealing purely with the account closure is not regulated immigration advice so advisers do not need to have any level of OISC registration.
There are leaflets online for those whose accounts have been closed, or have been refused an account.
Conclusion
The greatest risk of debts affecting clients subject to immigration control is with nationality applications.
Other than NHS and litigation debts to the Home Office, debt is unlikely to affect an application for leave to remain unless the debts are so severe as to prevent the applicant or sponsor satisfying a maintenance requirement.
For the debt adviser, they may need to consider how NHS and litigation debts are treated in debt solutions and also encourage debtors to get immigration advice where they intend to naturalise.
John Donkersley is Senior Immigration Expert at Citizens Advice. This article was prepared with the kind assistance of his colleague Graham O’Malley, Senior Debt Expert.
Last revised 30 May 2023 to include MXK case on NHS debts. Revised on 28 March 2023 to expand the section on bank account closures.
