Bishop v HMRC
| Jurisdiction | UK Non-devolved |
| Judgment Date | 30 September 2013 |
| Neutral Citation | [2013] UKFTT 522 (TC) |
| Date | 30 September 2013 |
| Court | First-tier Tribunal (Tax Chamber) |
[2013] UKFTT 522 (TC)
Judge Barbara Mosedale.
Ms A Redston, Counsel, instructed by BDO LLP, appeared for the first three Appellants
Mr R De Mello, Counsel, instructed by the fourth Appellant
Mr A Macnab, Counsel, and Mr P Woolfe, Counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the Respondents
VAT - regulations requiring online filing of VAT return and electronic payment of VAT - whether the tribunal had jurisdiction to consider in respect of online filing (a) HMRC's alleged failure to exercise discretion or (b) lawfulness of regulations - whether tribunal had jurisdiction to consider consequential liability to make electronic payment - whether online filing regulations (a) a breach of the human rights of old or disabled people (b) a breach of EU law as disproportionate (c) a breach of human rights as requiring taxpayer to use (allegedly) unsafe means of payment - appeals of first three appellants allowed - fourth appellant's appeal dismissed.
The First-tier Tribunal upheld the appeals of three of the four appellants, who claimed to be unable to comply with the requirement of HMRC that they must file VAT returns online. The tribunal found that because of the disproportionate application of the regulations to persons who are computer illiterate because of their age or who have a disability which makes using a computer difficult or painful, or to persons who live too remotely for a reliable internet connection, those regulations were an interference with the taxpayers' rights under the European Convention on Human Rights. So far as EU law was concerned, the tribunal found the online filing obligations to be disproportionate because they failed to provide exemptions for those unable to comply by reason of age, disability or lack of internet access. For the fourth appellant, whose case was based on the excessive risks associated with online filing, the tribunal could find no breach of UK public law, EU law or Convention rights and its appeal was dismissed.
The appellants, comprising two limited companies and two individuals, appealed against notices served by HMRC requiring them to file their VAT returns online and pay VAT electronically. They were in the first tranche of taxpayers obliged to submit returns online and the appeal was in the nature of a test case challenging this requirement. Three of the four appellants were represented by the Low Income Tax Reform Group and were selected as representatives of taxpayers who experienced difficulties in filing online. The fourth appellant, a limited company, was separately represented in its case that the risks in filing VAT returns and paying tax online were such that the law should not compel it to do so. HMRC's initial position was that the tribunal had no jurisdiction to consider the cases under public law or under the European Convention on Human Rights (the Convention). The tribunal rejected this contention and held that it had jurisdiction under Value Added Tax Act 1994 ("VATA 1994") Value Added Tax Act 1994 section 83 subsec-or-para 1s. 83(1)(zc), which provides that an appeal shall lie to a tribunal with respect to a decision of the Commissioners about the application of regulations under FA 2002, Finance Act 2002 section 135s. 135. The tribunal also considered that, in respect of the fourth appellant, it had jurisdiction under s. 83(1)(zc) to consider the lawfulness of the decision that the appellant must file online, and to include in that review the consequential liability to pay electronically.
The appellants' case was that online filing was a breach of their human rights, a breach of domestic public law and a breach of their rights under EU law. The tribunal heard reasons from the first three appellants as to why they were unable to file their VAT returns online. Two experienced disabilities that made it difficult to use a computer, while one lived in an area with limited internet access. All three were of an age that created problems with learning to use computers. The fourth appellant had no such difficulties but was concerned about online security and legal risk.
The tribunal observed that this was a very unusual case. Not only was it fairly unusual for Convention rights to be relevant in a tax case, but it was also an unusual case under the Convention. HMRC submitted that the appellants were unable to put forward a single Convention case with even remotely comparable facts, but the tribunal did not consider this to be relevant. HMRC relied heavily on their telephone filing concession as a remedy for the possibility that the bare regulations unlawfully discriminated against the elderly, the disabled, or those living remotely. However, the option of telephone filing was not made clear to taxpayers. A revised system of telephone filing was introduced in April 2012, under which HMRC would ring the taxpayer, rather than the other way around. However, the tribunal held that this concession could not be relied upon as a defence because it was unlawfully implemented, largely because there was an unjustified policy by HMRC to keep it unpublished.
Having considered the evidence, the tribunal decided in respect of the first three appellants that VATA 1994, s. 83(1)(zc) gave it jurisdiction to consider the lawfulness of HMRC's decision that the three must file online. Consideration of the lawfulness of those decisions extended to whether the regulations themselves were lawful under the Convention or under EC Directive 2006/112 ('the 2006 VAT Directive'). It also extended to a lesser extent to consideration of whether the decisions were lawful under national public law. The tribunal found that because of the disproportionate application to persons who are computer illiterate because of their age or who have a disability which makes using a computer difficult or painful, or to persons who live too remotely for a reliable internet connection, the regulations were an interference with Convention rights. The decision of HMRC was not unlawful to the extent that the tribunal had jurisdiction to consider matters of public law. However, the tribunal had jurisdiction to consider some matters of public law and, in particular, it found that HMRC could not rely on an unlawful concession, such as telephone filing. So far as EU law was concerned, the tribunal found the online filing obligations to be disproportionate because they failed to provide exemptions for the elderly, disabled persons or persons living too remotely for reliable internet access. Accordingly, HMRC's decision to apply regulations which were, so far as the joint appellants were concerned, unlawful, was unlawful and for that reason the appeals of the first three appellants were upheld.
For the fourth appellant, the tribunal found that s. 83(1)(zc) only gave it jurisdiction to consider the legality of the decision that it must file online and as that necessarily carried with it the liability to pay electronically. In the judgment of the tribunal, the obligation to file online was not in itself unlawful under the Convention, nor under EU Law, nor as a matter of UK public law. Whilst the appellant demonstrated that there was a risk of interception by third parties, the degree of the risk was not shown. Since the Convention does not give a right for persons to be guaranteed risk-free communications, this meant that the fourth appellant had failed to demonstrate that there was a breach of his Convention rights. So far as the obligation to pay electronically was concerned, the alleged breach by being required to correspond on the internet was not made out on the facts as the regulations did not require the taxpayer to commit its private banking details to the internet. The obligation to file online or to pay electronically was not a breach of UK public law, in so far as the tribunal had jurisdiction to consider the matter. So far as EU law was concerned, there was no breach of the Charter, nor were the regulations disproportionate. The appeal of the fourth appellant was, therefore, dismissed.
The decision in this test case established that the mandatory filing of VAT returns online contravenes the rule of law by failing to make provision for the needs of older or disabled persons or for those without access to reliable broadband. In view of the substantial investment by HMRC in online filing technology it is likely that they will seek to pursue their policy of digital mandation.
For commentary on the online filing of returns see the CCH VAT Reporter at 55-210.
| Heading | Page no | |
| Overview of the cases | ||
| • The four appellants; | 3 | |
| • The law at issue in the appeals | 5 | |
| Jurisdiction of the tribunal | 9 | |
| • Is there a "decision" within s 83(1)(zc)? | 10 | |
| • Jurisdiction in public law matters | 13 | |
| • Jurisdiction over human rights issues | 39 | |
| • Jurisdiction over EU law matters | 48 | |
| The facts | 49 | |
| Telephone filing and the enquiry office concession | 76 | |
| The European Convention on Human rights | ||
| • General | 89 | |
| • Do companies have human rights? | 91 | |
| • A1P1 (right to property) | 95 | |
| • A8 (right to private life) | 103 | |
| • A14 (right not to be discriminated against) | 113 | |
| • Conclusions | 130 | |
| EU law | 134 | |
| • The Charter | 136 | |
| • Proportionality | 145 | |
| Summary of conclusions | 151 |
| Glossary of terms used | |
| A1P1 | Article 1 of the First Protocol to the Convention: the right to property |
| A6 | Article 6 of the Convention: right to a fair hearing |
| A8 | Article 8 of the Convention: right to respect for private and family life |
| A14 | Article 14 of the Convention: non-discrimination |
| CJEU | The Court of Justice of the European Union |
| Charter |
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