Three VAT registered businesses who have difficulty using online services have won their appeal against HMRC’s requirement that they file their VAT returns online.

The business owners were supported in their appeal by the Low Incomes Tax Reform Group (LITRG):

  • All three ran their own businesses. Two have disabilities which made it excessively difficult or impossible for them to use a computer, and a third lived in a remote area of the country where broadband access was absent or unreliable.
  • 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 all filed their VAT returns promptly and accurately on paper for many years.

In a ground-breaking decision, the judge held that the 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 the appellants’ human rights and were unlawful under the EU law.

The appeals were heard in the First-tier Tribunal, Tax Chamber, with Judge Barbara Mosedale presiding. The appellants themselves were represented by Miss Anne Redston of Counsel instructed by Mr Nigel Eastaway, then of BDO and now of MacIntyre Hudson.

Anthony Thomas, Chairman of the LITRG, said:

“This case shows that HMRC must consider the needs of taxpayers when making regulations about complying with VAT and other tax requirements. They cannot just act in isolation without regard for the human rights of taxpayers and to other provisions of the general law of the land. 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.

“LITRG are pleased to have played our part in establishing this principle, and we and the appellants place on record our appreciation of the very significant work of BDO, Nigel Eastaway and Anne Redston, and the very careful and thorough examination of all the legal issues by the judge.”

There are many other implications of the decision which the LITRG together with appellants’ legal advisers must take time to consider.

Anthony Thomas added:

“Any assistance HMRC offer to taxpayers in complying with their obligations must be responsive to the diverse needs of the people it is supposed to help. We remain willing to work with HMRC to ensure that those who cannot use online channels for reasons of disability, age and so forth are treated appropriately and in accordance with the law. This must involve giving them alternative means of complying with their tax obligations – including paper filing – that are workable and meet their particular needs.”