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VAT returns: electronic filing

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In the wake of the tribunal decision in LH Bishops Electric Company Ltd (TC02910) that certain taxpayers’ human rights are contravened by the lack of alternative to electronic filing of VAT returns, HMRC, on 23 December, launched a consultation titled VAT: Amendments to legislation – assistance with electronic filing of VAT returns. This closes on 14 February 2014.

As the decision was only issued on 30 September 2013, HMRC should be praised for its rapid response and willingness to undertake a consultation, which implies that it will not be appealing the decision. Ironically, however, since one of the main criticisms by the tribunal was HMRC’s failure to publicise its alternative means of submitting a VAT return (for those unable to use normal computer interfaces), choosing 23 December is unfortunate, since a significant proportion of the business population embarked on Christmas holidays that day. It would have been better to delay until 6 January 2014. This would have ensured greater awareness of the consultation, and a longer effective period in which to respond.

It is also strange that HMRC refers so clearly in the paper to ‘assistance with electronic filing’, when the main point of the tribunal decision is that there should be alternatives to electronic filing. And they say that the designated alternative, ‘filing by telephone’, is a form of electronic filing simply because the business dictates figures to an HMRC officer who, himself, enters them electronically. By no stretch of the imagination can this be regarded as genuine ‘electronic filing’ by the taxpayer. The main criticism the tribunal had of telephone filing was the fact that it had not been publicised. Clearly, the purpose of the consultation, and any amendment to legislation, is to publicise it, but this ignores a supplementary but important point which was that the telephone filing system was so inconvenient to access that it did not amount to a genuine business-like alternative. This has been glossed over by the consultation document, which appears to be based on the assumption that sufficient publicity is enough to repair the damage.

The tribunal decision also (surprisingly) concluded that it was possible for a business operative to argue that he did not have sufficient experience of computers if he had attended school at a time when computers were not used as part of the curriculum. The age from which this might apply is around 45. In the light of this admittedly surprising conclusion, it is odd that the consultation refers to a potential qualifying class of user (for the alternative) as being the ‘elderly’. The tribunal had specifically said that this was not an issue that was confined to those who are ‘elderly’ by normal standards.

As is commonly the case with consultations, the questions appear to be slanted towards the desired outcome, but a consultation nonetheless provides respondents with an opportunity to make general comments.

Finally, HMRC justifiably seeks to defend its general policy by referring to the fact that it implemented Lord Carter’s suggestions for going ‘digital by default’ and that to allow anything other than almost a universal mandatory digital submission would be unfair to most taxpayers (and unwieldy for HMRC, no doubt).

Whilst this is a fair point, it is not sufficient justification for breaching taxpayers’ human rights, however unexpected was that outcome.