A challenge to filing VAT online

It has been mandatory for businesses to file online VAT returns from 1 April 2012 – but not everyone agrees.

LH  Bishop Electrical Co Ltd is the business that first had an issue with online filing and contacted HMRC.

This led to a first-tier tribunal (FTT), concluding that the VAT regulations failed to take account of:

  • age;
  • disability;
  • computer illiteracy (linked to age); or
  • remoteness of location. 

The FTT found that the regulations were in breach of the European Convention on Human Rights (ECHR).

The case further concluded that HMRC could not rely on the fact that telephone filing had been made available to certain businesses. 

The government consulted on amending the law in December 2013 and closed the consultation in February 2014, with the summary of responses published in April.

This resulted in a further consultation which closed in May 2014 and was based on amendments recommended by the first consultation. 

Proposed changes

The proposed changes are to extend the exemptions from online filing as detailed in regulation 25A(6) of the VAT Regulations 1995 and the refusal to allow exemption would be appealable under section 83(zc) of the VAT Act 1994.

HMRC will provide further clarification on when it may issue a direction approving telephone filing for use by specified persons. It will approve a business once it is satisfied that it is not reasonably practicable for a person to file online using any of the current methods.

This will fall in line with the improvements that will be made to the telephone filing system, as suggested by the responses to the first consultation. 

The revised VAT regulations have already been presented to Parliament and were in force from 1 July 2014. HMRC has yet to provide guidance on the direction of specified users of the telephone filing system; this is expected shortly. 

This is seen as a victory for those unable to follow the mandatory online filing regime that HMRC has been following, provided that a business can prove it has no other means of filing.