Mandatory online VAT filing faces legal challenge

PROPOSALS TO introduce compulsory online filing for VAT returns is being legally challenged by three business owners who are unable to use computers, Accountancy Age has learned.

HM Revenue & Customs released a consultation document this month aimed at decreasing the use of paper filing and registration, in line with government-wide thinking. However, unlike the Department for Work & Pensions and the Driving Standards Agency, HMRC has offered no exemptions to vulnerable individuals who are physically incapable of accessing online services.

The proposals extend the current policy of compulsory online filing for businesses with a turnover of £100,000 and above. If the proposals go through, they will apply to all businesses from April 2012.

However, in November 2010, three appellants who own businesses with a turnover of £100,000 and above applied to a judge to continue to be allowed to file paper VAT returns. The individuals include a resident in an area of little broadband access, someone with arthritis and a business owner who has sight problems and water on the brain (hydrocephalus). They have all said that, although the turnover of their businesses is relatively high, the profit margins are low and implementing the equipment required to go online would put them out of business.

The judge’s ruling at the pre-tribunal stage will stand until there is either a full tribunal or an agreement is reached. A few days before the full hearing was scheduled in June, HMRC has offered the individuals the option of telephone VAT returns or employing an advisor to complete the returns.
However, Robin Williamson, chair of the Low Income Tax Reform Group, said the telephone option will create extra burdens and the businesses cannot afford to employ advisors.

The legal challenge is unlikely to go further until after the proposals in the current consultation document are finalised. However, they currently only offer exemptions to insolvent businesses and certain religious groups.
Robin Williamson, technical director of the Low Incomes Tax Reform Group, said that the individuals involved are waiting on the outcome of the consultation document. The proposals as they stand are not acceptable, however.

“There isn’t very much overtly stated in the consultation, but one hopes by the end of the consultation period, there will perhaps be a little more on digital assistance,” he said. “We hope HMRC will take seriously the fact that there are a great many people in areas of the country where broadband is slow or non-existence, or those that cannot afford it, or those that have disabilities that prevent them from doing so.”

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