Permanent residency denied

I work full time teaching English for a company, but also teach privately in my spare time, which I keep accounts for, and file my taxes properly every year. (青色申告）

I applied for permanent residency and was told that I was refused because my company is the main sponsor for my visa and this working privately is not allowed. However it is the same work category (Specialist in Humanities - AKA non-JET English teaching) , and I don't believe there is any obligation to notify as long as I don't work outside of the scope of said visa.

Teachers who work directly for city office are often contractually prohibited from teaching private classes, but my ALT dispatch contract has no such stipulation, and in fact I made it a condition of my accepting the position that they agreed to my being able to do that.

Now my working visa is soon due to be renewed and I'm a little nervous that this could come up as an issue then. Anyone had any similar experiences?

So you have been working with your employer-sponsored work visa/resident status for 10 years by now, I assume (since you are applying for PR).

I don't know how long you have been doing your private teaching, but has that ever been an issue in the past when you got your work visa/resident status renewed with the help of your employer? If your employer has no problem with you doing some additional work on the side, I see no problem getting the work visa/resident status renewed.

and I don't believe there is any obligation to notify as long as I don't work outside of the scope of said visa.

Yes, there is.

it might be:
"this working privately" is one sort of self-employing.
self-employing is a different category of working visa.

Out of curiosity, how long did it take to get the rejection? I may be in a similar boat since I do several different things, and I applied at the end of January. In early May I got a notice asking for some tax paperwork from my guarantor, but nothing related to my work, so I was thinking that perhaps my application was deemed okay but things like this make me worry.

You may want to find a reputable immigration attorney who can draw up some proof that your work is legal- that's my plan if I'm not approved the first time.

The working privately and doing accounts/taxes is not covered by your work visa for teaching, as mentioned. Do you actually have a company (KK for instance) or is it unincorporated (which is not visa supportable as far as I know). Sounds like a problem - get some good legal/immigration advice.

Immigration has every right to decide on your visa's renewal using every information available to them.

I don't know your specific visa class, but I have been on a visa class where the job was the same, but the employer changed. I was required to get a new visa (NB: This was a very long time ago...perhaps the rules have changed). So, a "teaching" visa doesn't mean you can do all types of teaching -- you may be bound to your employer, especially if that employer is your sponsor.

Just because your employer says it is "ok" doesn't mean that immigration is ok with it.

Perhaps you were able to file your taxes because the tax office doesn't actually talk to immigration. i.e., accepting the taxes you paid does not mean that your private work was acceptable by immigration. We think of the Japanese government (or any government) as one unit -- actually it's a bunch of units that usually don't talk to each other until someone upgrades their computer system.

I don't mean to scare you; but I do agree with JapanCustomTours that you should seek some legal advice. However, if your work visa is denied, you can appeal, but there isn't much you can do about it. Anyone on a visa doesn't have a "right" to have a visa -- that is the same both for Japan and any other country.

"Specialist in Humanities", like almost all statuses of residence commonly referred to as "work visas", only covers activities performed under a contract with a Japan-based organisation. A "private" activity is thus automatically out-of-scope, and requires prior permission.

I've heard conflicting information on this question. I strongly encourage you to seek professional legal advice.

Specialist in Humanities is a visa for an employed person. you and the employer have to make a contract in which your salary should be shown. the employer has to withdraw the income tax from your salary and pay it to tax office.
you can be English teacher at two (or more) companies, if you make suitable contracts and the employers paid your income tax independently.
if you have a side business as private teacher to individuals (or companies), you are no more an employee. you are an owner of the side business.