Mandatory online VAT filing ruled discriminatory

In a ground-breaking decision the First Tier Tax Tribunal has ruled that HMRC regulations requiring online filing of VAT returns are discriminatory, as they fail to offer alternative options and exemptions for people with additional needs, such as older people, those with disabilities and people living in areas without broadband access, reports chartered accountants Harris & Co.

The FTT tribunal made the ruling in the case of three people who all run their own small business and who were appealing against HMRC’s requirement that they file their VAT returns online. The tribunal found that the regulations were in breach of the appellants’ human rights and were unlawful under the EU law.

Two of the appellants had disabilities which made it excessively difficult or impossible for them to use a computer, while the third lived in a remote area of the country where broadband access was absent or unreliable. The tribunal heard that all three were of an age which made learning how to use a computer particularly difficult and they would have had to incur the cost of instructing an agent. They had been filing their VAT returns promptly and accurately on paper for many years.

The appeal by the three was supported by the Low Incomes Tax Reform Group (LITRG), which said the case showed that HMRC must consider the needs of taxpayers when making regulations about complying with VAT and other tax requirements, and should be offering alternatives where necessary, including paper filing.

LITRG chairman Anthony Thomas said: ‘When making policy and promulgating regulations HMRC, like all other public authorities, must obey the rule of law. We now know that digital mandation is a policy that contravenes the rule of law when it fails to make provision for the needs of older or disabled people or those who cannot access broadband easily because of where they live.’