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Any business that registered or should have registered for VAT after 31st March 2010 has had to submit its VAT Return online and pay electronically. The only exception (in new regulation 25A(4) Value Added Tax Regulations 1995) is for businesses run by those whose religious beliefs prevent them from using computers. So faith doesn’t just move mountains…

All well and good for Plymouth Brethren who can rejoice in using snail mail for their VAT returns and payments but everyone else be they a Welsh hill-farmer miles from the nearest broadband connection, disabled or just plain Luddite simply has to fall in line or face penalties.

This uncompromising approach on the part of HMRC will clearly deliver savings on their processing, storage, stationery and postage costs but is it fair to achieve this with a blanket ruling that imposes a disproportionate burden on some?

In support HMRC cite Lord Carter of Coles’ Review of HMRC Online Services, published in March 2006, as having recommended that all newly registered businesses whatever their turnover move to online VAT filing from 1st April 2010. No mention of the fact that, (at pages 5 and 21), the review document appears to have qualified the much-trumpeted recommendation as follows:

‘Paper filing will remain an option for traders with turnover below £100,000 but the Government should review the need for this exception in the run-up to 2012.’

(2012 was the target date for online filing of business tax returns).

In Appendix 5 the Review refers to the ‘exemption’ from online filing for traders with turnover of less than £100,000.

During the 2009 consultation process on the proposed implementing legislation, a number of concerns were raised including the following:

• Many of those affected were not computer literate and may not even own a computer.

• Some in rural areas had limited access to broadband and to high speed broadband in particular.

HMRC’s words of comfort were:

• The online process was designed to be as simple and intuitive as possible.

(Well they failed with that one obviously.)

• Very few people had absolutely no access to a computer – they could use those belonging to friends and family. There were internet cafes and computer access in local libraries.

(How many internet cafes are there on North Uist? What’s a library, Mummy?)

• Broadband was not necessary as the online service was designed to work well with dial-up.

(HMRC’s track record with computer systems is legendary.)

• The availability of broadband was an area where ‘perception lags behind reality’.

(Enough with the existentialism already.)

• According to research published by BIS (the Department of Business Innovation and Skills), by December 2005 99.8% of UK households and 99% of Scottish households could get broadband.

(In other words, all you whingers could get broadband if only you tried hard enough.)

The Low Incomes Tax Reform Group is supporting appeals by several individuals (who would otherwise have been unrepresented) against the requirement that VAT returns be filed online (whatever the difficulties) in all cases other than those where there are religious objections. LITRG concludes that, ‘requiring citizens to fulfil their statutory obligations in this one way with no alternative for paper filing is in our view at best disproportionate, at worst a breach of their human rights.’

I agree and wish them success. In the meantime, pass me my Kindle.


*** UPDATE – July 2014 ***

The appeals supported by LITRG referred to in the blog have now been heard and the decision was issued on 30 September 2013. In a 154 page tour-de-force the First-tier Tribunal (in the shape of Judge Barbara Mosedale) decided that regulations which required online filing of VAT returns without providing exemptions for older people, those with disabilities or who lived in parts of the country which were too remote for broadband access, were in breach of those taxpayers’ human rights and were therefore unlawful.

Judge Judy, eat your heart out.

In response to the tribunal decision in LH Bishop Electrical Company Ltd referred to above, the VAT Regulations 1995 (SI 1995/2518) have been amended with effect from 1 July 2014 to set out the circumstances in which HMRC will allow VAT-registered businesses to submit returns by telephone or paper instead of online. Thenew  measures  enable HMRC to approve telephone filing as an alternative form of electronic return system for certain businesses; and provide an exemption from electronic filing and telephone filing for businesses for whom HMRC agree that it is not ‘reasonably practicable’  to use either. Such businesses will be able to continue  to file on paper.

Let’s see how this pans out …

Tax lawyer specialising in business tax, SDLT and VAT

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