Three appellants supported by the Low Income Tax Reform Group (LITRG) have won their appeal against HMRC’s requirement that they file their VAT returns online.
First tier tribunal judge Barbara Mosedale 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, were in breach of the appellants’ human rights and were unlawful under the EU law.
All three ran their own small businesses, two of which experienced disabilities which made it excessively difficult or impossible for them to use a computer, while 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 also all filed their VAT returns promptly and accurately on paper for many years.
Anthony Thomas, chairman of the LITRG, said: “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.”
The ICPA congratulated the LITRG for supporting the case.
“One wonders whether HMRC will appeal, most likely they will because the juggernaut that is the digital agenda is rolling down the hill at an increasing pace and those cost savings could be put in jeopardy,” the ICPA said.
They added that failing to recognise that there are people with disabilities and areas of the country where the internet is simply not guaranteed is not only short sighted but “frankly arrogant”.
In a separate announcement he LITRG has warned that self-employed low income workers will be unnecessarily burdened by HMRC’s proposal to move a key National Insurance contribution to the 31 January after the tax year.
The NIC in question is known as ‘Class 2’ and is a regular weekly sum payable by self-employed earners to establish their entitlement to contributory benefits such as the state retirement pension.
At present they are often collected by monthly direct debit, but in a recent consultation paper, HMRC proposed moving the due date to the 31 January after the tax year, and collecting Class 2 contributions from the self-employed at the same time as their income tax self assessment liabilities.
The LITRG’s chairman Anthony Thomas said that while this may reduce administrative time, it must be acknowledged that it is incumbent upon HMRC to take into account the needs and challenges faced by those on low incomes.
“Collecting this extra amount on 31 January will increase the burden of debt on people on low incomes, and adversely affect their position under the new Universal Credit,” he said, adding it “will do nothing to decrease the amount of Class 2 debt.
“It is also clear from informal discussions HMRC held with self-employed workers that the current NI system is poorly understood, particularly with regard to Class 2 NI and benefits to which it gives entitlement. The Small Earnings Exception (exemption from Class 2 for those on the lowest profit levels), too, is barely understood.”
LITRG recommends that improving how taxpayers are notified and informed of their rights and obligations would be a far better option than simply changing the system.
This would be to collect Class 2 NI monthly, as is the case now, or alternatively via the SA system in two instalments in January and July.