Illegal-Working Penalties: The Statutory Code Sets the Starting Point, but Does Not Exhaust Judicial Mitigation

1. Introduction

This judgment establishes an important balance between consistency and individual justice in appeals against civil penalties for illegal working. The statutory Code of Practice supplies the starting point and specified mitigation discounts, but it does not exhaust the matters that a court may consider. Under section 17(3) of the Immigration, Asylum and Nationality Act 2006, relevant considerations outside the Code—including financial means and the overall proportionality of multiple penalties—may justify a reduction.

The Court of Appeal considered two appeals against penalties imposed by the Secretary of State for the Home Department. One concerned Jen & Jamie Limited, trading as Somerset Convenience Store; the other concerned an individual property owner undertaking renovation works. Both challenged the restrictive approach taken by the County Court to mitigation outside the 2024 Code of Practice.

A further issue arose following an intervening Supreme Court decision: whether the penalty notices adequately identified the statutory basis of liability. The resulting judgment addresses both the substantive assessment of penalties and the procedural safeguards governing their imposition.

2. Background and Statutory Framework

The company’s penalty

Following an enforcement visit in July 2024, the Secretary of State alleged that the company had employed two workers contrary to restrictions attached to their immigration permission. Each held permission under the Skilled Worker Scheme, but their work as shop assistants fell outside the permitted conditions for supplementary employment.

The company denied employing either worker. The County Court rejected that account, finding reciprocal obligations to attend and perform work and to provide remuneration. It upheld penalties of £40,000 per worker, totalling £80,000.

On the amount, the County Court treated the Code’s calculation framework as effectively exhaustive. It considered that taking account of additional personal or financial circumstances would introduce uncertainty and encourage appeals outside the statutory scheme.

The individual employer’s penalty

The second appeal arose from building works at premises owned by the individual appellant. Although the original notice concerned two workers, the Secretary of State subsequently accepted that one had a right to work. The remaining worker had described carrying out building work for cash and being paid by the appellant.

The appellant maintained that the worker was an acquaintance providing voluntary assistance. The County Court rejected that explanation and found a contract of service. It also upheld the remaining £40,000 penalty, reasoning that judicial sympathy or disagreement with the policy underlying the Code could not justify departing from its framework.

The statutory provisions

Three provisions of the 2006 Act were central:

• Section 15: permits penalties for employing an adult subject to immigration control without the necessary permission, including employment prohibited by conditions attached to existing leave. Section 15(6)(a) requires the notice to state why the Secretary of State considers the employer liable.
• Section 17: permits an employer to challenge liability, rely on a statutory excuse, or argue that the amount is too high. The appeal is a re-hearing, rather than merely a review of the original decision.
• Section 19: requires a Code of Practice specifying factors for the Secretary of State to consider when determining penalties, subject to the prescribed parliamentary process.

The decisive wording was section 17(3). It requires the court to determine the appeal having regard both to the applicable Code and to any other matters which the court thinks relevant, including matters previously unknown to the Secretary of State.

The Code’s penalty structure

The judgment applied the 2024 Code. For a first breach, its starting point was £45,000 per worker; for repeat breaches, the figure was £60,000. The identified mitigation included:

• a £5,000 reduction for reporting the suspected illegal worker;
• a £5,000 reduction for active cooperation; and
• for a first breach, the possibility of a warning where effective right-to-work checking practices existed alongside the other two factors.

The scheme also offered eligible first-time recipients a 30% reduction for full payment within 21 days and provided for instalment arrangements. These mechanisms did not, however, resolve the separate statutory question of what a court could consider on appeal.

3. Summary of the Decision

The Court of Appeal reached four principal conclusions:

1. The late amendments were permitted. Both appellants could introduce arguments based on the intervening Supreme Court decision concerning the required contents of penalty notices.
2. The company’s notice was valid. Read with its accompanying statement of case, it sufficiently identified the work restrictions breached and therefore the relevant statutory ground.
3. The County Courts had construed their discretion too narrowly. The Code was not an exhaustive list of permissible considerations. Relevant matters outside it could justify reducing a penalty.
4. The outcomes differed. The company’s challenge to the amount was remitted for reconsideration. The individual appellant’s appeal was allowed following withdrawal of the defective notice, although the Secretary of State had served a replacement notice.

The Court of Appeal did not itself reduce the company’s penalty or decide that its financial evidence established an entitlement to a reduction. Nor did it disturb the finding that the company had employed the two workers.

4. Legal Reasoning

A. A rehearing requires an independent assessment

The statutory description of the appeal as a rehearing was fundamental. The court is not confined to asking whether the Secretary of State’s decision was rational or procedurally defensible. It must determine the appeal itself, considering the matters Parliament has identified.

Section 17(3)(a) directs attention to the Code; section 17(3)(b) expressly preserves consideration of other relevant matters. Treating the Code as exhaustive would deprive the second provision of meaningful operation.

Accordingly, the Court rejected the Secretary of State’s principal submission that factors outside the Code were legally irrelevant. The statutory function could not be reduced to checking whether the administrative calculation had been performed correctly.

B. The Code nevertheless controls the starting point

The judgment does not authorise an unrestricted reassessment according to each judge’s preferred penalty policy. The Code reflects the identified harms of illegal working, distinguishes first and repeat breaches, and specifies reductions for particular forms of mitigation.

A court must therefore begin with the Code’s framework. It cannot award a larger discount for self-reporting or cooperation simply because the judge would personally have chosen a more generous figure. That would fail to give proper effect to the Code.

The Court also rejected the appellants’ proposal that judges could select their own starting point and reduce the penalties to nothing. The relevant discretion supplements the statutory framework; it does not displace it.

C. Totality can justify adjustment

The principle of totality requires the overall penalty to remain proportionate to the wrongdoing as a whole. This is particularly significant where separate per-worker penalties accumulate into a substantial aggregate sum.

Totality is not an automatic discount for employing several workers unlawfully. Rather, the court must consider whether the combined financial consequence, assessed against the Code and any other relevant circumstances, is proportionate to the entire breach.

D. Means are relevant, but require evidence

The Court expressly recognised financial means as a potentially relevant consideration. The County Court’s comparison with compensatory personal injury damages was therefore misplaced: an immigration penalty punishes wrongdoing rather than compensating an injured claimant.

However, a claim of hardship must be supported by reliable evidence. Drawing an analogy with criminal financial penalties, the Court identified matters such as turnover, profit before tax, directors’ remuneration, loan accounts and pension provision as potentially important. It referred to the expectation in criminal proceedings that a company provide three years of audited accounts and envisaged a similar evidential approach to these penalties.

This should not be confused with a new, freestanding statutory auditing requirement for all employers. The underlying point is that a court needs sufficiently complete financial material to assess a means-based argument. Failure to provide relevant accounts may justify an inference that the employer can pay an otherwise appropriate penalty.

Even the prospect of business closure is not decisive. It is relevant, but in a sufficiently serious case closure may be an acceptable consequence.

E. Effective compliance systems may matter in exceptional cases

The Court identified a further possible consideration: an effective right-to-work checking system that had not produced either a statutory excuse or a warning and for which no financial reduction had been given.

In a rare case, that circumstance could bear on culpability and proportionality. The qualification is important. A general assertion that an employer usually tries to comply does not automatically establish mitigation or a defence, and the reasoning does not justify counting the same mitigation twice.

The appellants also suggested factors such as duration, exploitation and genuine attempts to comply. The Court declined to prescribe an exhaustive list in the abstract. Its decision therefore leaves room for future fact-sensitive development without endorsing every suggested factor.

F. The company required a fair opportunity to prove its case

The company had produced one set of unaudited accounts reporting turnover of £711,179 and profit before tax of £31,633. Its evidence asserted that the penalty would force liquidation.

That material raised unresolved questions, including the ownership of the premises and possible connections with another business. But the County Court had not made the necessary findings because it had accepted that means were irrelevant.

The Court of Appeal therefore remitted the penalty issue. Both sides needed a fair opportunity to address the financial evidence and any other relevant factors. Remittal corrected the legal approach without prejudging the appropriate amount.

G. A bare assertion that a penalty is excessive is insufficient

The individual appellant had not placed evidence of means, totality or another relevant mitigating factor before the County Court. Although the restrictive legal approach below was wrong, there was no evidential basis on the existing material for reducing the penalty.

Because the original notice had been withdrawn, that conclusion was relevant only to costs. Any challenge to the replacement notice would depend on the material and issues properly advanced in that process.

5. Precedents Cited and Their Influence

Akbars Restaurant v Secretary of State for the Home Department [2026] UKSC 26; [2026] 1 WLR 3603

This was the most immediately consequential authority. The Supreme Court had reversed the earlier Court of Appeal decision, [2024] EWCA Civ 1387; [2025] 1 WLR 1306, and held that the penalty documentation must identify the particular limb of section 15(1) relied upon.

Its influence operated in two ways. First, it supported the new notice-validity grounds. The company’s notice, read with its statement of case, explained that the workers had immigration permission but were working contrary to its conditions. That sufficiently identified section 15(1)(b)(iii). The individual appellant’s notice was conceded to be defective.

Secondly, the Supreme Court’s explanation that the scheme is penal in nature informed the approach to mitigation. The civil procedural label did not remove the need to recognise the punitive character of the financial sanction.

International Transport Roth Gmbh v Secretary of State for the Home Department [2003] QB 728

This case concerned penalties imposed on carriers for clandestine entrants. The majority treated that scheme as criminal for Article 6 of the European Convention on Human Rights and found its inflexibility and associated burdens incompatible with Convention requirements.

The present judgment used that history to explain the significance of mitigation and meaningful judicial control in immigration penalty schemes. Following Roth, legislation replaced fixed carrier penalties with discretionary penalties and introduced appeals by rehearing.

The Court did not thereby hold that every employer penalty is a criminal charge for all purposes. The relevance was contextual: an inflexible scheme can produce serious fairness and proportionality concerns.

Loane Transport v Secretary of State for the Home Department [2004] EWCA Civ 1013

This was the closest analogy for the treatment of means and totality. Under the amended carriers’ scheme, the County Court had considered those matters irrelevant. On appeal, that approach was accepted to be erroneous.

Laws LJ explained that a court considering whether a penalty was too high would plainly regard means and totality as relevant under the statutory wording. The comparable language in section 17(3) supported the same conclusion here.

Loane therefore provided more than general background: it supplied direct appellate support for recognising these factors within a rehearing jurisdiction.

Ashfaq v The Secretary of State for the Home Department [2012] WL 4866907

The Scottish Sheriff’s Court had considered mitigation outside the Code, including the appellant’s means. The company’s County Court judge declined to follow that approach, regarding it as an inappropriate mixing of civil and criminal jurisdictions.

The Court of Appeal’s reasoning undermines that objection. Although it did not adopt every aspect of the Scottish decision, it confirmed that financial means can be relevant because the statutory language permits other relevant considerations and the sanction is penal.

R(Munjaz) v Mersey Care NHS Trust [2005] UKHL 58; [2006] 2 AC 148

The Secretary of State relied on this authority when arguing for a restrictive approach to the Code. The Court distinguished it because the governing statute here expressly directs the appellate court to consider other matters it thinks relevant.

The distinction illustrates an important interpretative point: the weight and effect of a statutory code depend on the legislation governing the particular decision. General propositions about codes cannot override express statutory wording.

Beoco v Alfa Laval [1995] QB 137

This authority concerned the costs consequences of amendments. It supported the availability of costs protection for a party facing a late change of case, including potentially costs incurred before an amendment where the case would otherwise have failed.

That protection helped make it fair to permit the new grounds without adjourning the hearing. The Court reserved the costs of and occasioned by the amendments; it did not determine those costs in the judgment.

R(J's Supermarket) v Secretary of State for the Home Department [2026] EWCA Civ 1147

This decision was mentioned for its consideration of aspects of the Skilled Worker Scheme. Its role was contextual: it helped locate the immigration restrictions described in the company’s notice. It was not the source of the ruling on judicial mitigation.

F Howe and Sons (Engineers) Ltd [1999] 2 All ER 249

This criminal sentencing authority supported the proposition that the risk of forcing a company out of business is relevant but not necessarily decisive. Its use was analogical. The Court drew assistance from established financial-penalty principles without applying criminal sentencing legislation directly to the civil scheme.

6. Notice Validity and Late Amendments

The judgment distinguishes an inadequately explained notice from one whose accompanying reasons clearly identify the statutory allegation. The company’s documentation stated that the workers had permission to work for a named sponsor, described the limits on supplementary employment, and explained why shop-assistant work breached those limits. Read as a whole, it met the statutory requirement.

The individual appellant’s defective notice was withdrawn, but that did not confer permanent immunity from enforcement. The Secretary of State served a replacement notice, consistently with the approach contemplated by the Supreme Court.

The permission to amend was equally qualified. The applications came shortly before the hearing, without a satisfactory explanation for the delay or advance notice to the respondent. The Court emphasised procedural rigour and cooperation under the Civil Procedure Rules.

Nevertheless, the intervening Supreme Court ruling supplied a compelling reason to address the law as correctly understood. The documents could be obtained, the issues could be resolved without adjournment, and costs could protect the respondent. This was a fact-sensitive exercise of discretion, not a general relaxation of amendment requirements.

7. Practical and Legal Impact

• Penalty appeals must go beyond arithmetic where appropriate. Correct application of the Code does not answer a properly evidenced argument based on additional relevant circumstances.
• Consistency remains protected. The Code’s starting points and specified discounts cannot be replaced by individual judicial preferences.
• Financial evidence should be prepared early. Employers relying on hardship need sufficiently complete accounts and supporting explanations, not merely assertions of threatened insolvency.
• Multiple penalties require an overall proportionality assessment. Totality can be relevant, but does not automatically reduce per-worker sanctions.
• Notice documentation requires careful scrutiny. The notice and accompanying statement must identify the statutory basis of liability with sufficient clarity.
• A legal error does not guarantee a reduced penalty. The appellant must establish facts capable of supporting the requested adjustment.

The ruling principally concerns the appellate court’s powers under section 17. It should not be read as deciding every question about the Secretary of State’s own discretion or automatically applying the same approach to differently worded penalty schemes.

Its broader significance is the reconciliation of policy consistency with individualised adjudication: the statutory Code structures the decision, while the express rehearing jurisdiction prevents it from becoming an inflexible ceiling on relevant mitigation.

8. Complex Concepts Simplified

Rehearing

The court decides the appeal for itself, rather than merely checking whether the original decision was legally defensible.

Totality

The overall financial penalty should remain proportionate to all the wrongdoing taken together, especially where several penalties accumulate.

Means

The employer’s financial resources and ability to pay, established through evidence rather than assertion.

Penal in nature

The payment punishes a statutory breach. Calling it a civil penalty does not make it equivalent to compensation for financial loss.

Statutory excuse

A protection against payment arising from compliance with the prescribed right-to-work checking requirements.

Remittal

Sending an issue back to the lower court for a fresh determination under the correct legal approach.

9. Conclusion

The central rule is that the Code governs the starting point, but does not exhaust the court’s assessment. Section 17(3) preserves consideration of other relevant matters, including evidenced financial means, totality and, exceptionally, effective compliance systems not otherwise credited.

The company consequently obtained a fresh hearing on the amount—not an automatic reduction. The individual appellant succeeded because the original notice was withdrawn, while remaining exposed to the replacement notice. Together, those outcomes demonstrate that meaningful judicial scrutiny depends both on lawful enforcement documentation and on properly evidenced mitigation.