Blackburn and Another (t/a Cornish Moorland Honey)
| Jurisdiction | UK Non-devolved |
| Judgment Date | 02 October 2013 |
| Neutral Citation | [2013] UKFTT 525 (TC) |
| Date | 02 October 2013 |
| Court | First Tier Tribunal (Tax Chamber) |
[2013] UKFTT 525 (TC)
Judge Barbara Mosedale.
The appellants appeared in person
Mr P Woolfe, Counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the Respondents
VAT - requirement to file online - whether appellants entitled to exemption - whether requirement to file online a breach of their rights under the European Convention on Human Rights ("the Convention") to manifest their religion - appeal allowed.
The First-tier Tribunal upheld the appeal of the taxpayer partnership against the requirement of HMRC that VAT returns must be filed online. The partners were members of the Seventh-day Adventist Church and claimed that the requirement to use a computer to submit returns went against their moral and religious beliefs. In the judgment of the tribunal, the requirement to file online was a restriction under art. 9(1) of the European Convention on Human Rights in so far as these taxpayers were concerned in their right to manifest their religious beliefs.
The taxpayers carried on as a partnership the business of bee keeping under a voluntary VAT registration, as their turnover was below the compulsory registration limit. They were required by HMRC to submit their VAT returns online with effect from 1 April 2012, but asked HMRC to review their decision. By letter dated 4 May 2012 HMRC's decision was upheld on review. The taxpayers were members of the Seventh-day Adventist Church and, although none of the Church's fundamental beliefs directly concerns electronic communications, the Church does require its members to be discriminating in their use of modern media, including computers and the internet. The taxpayers chose to shun computers, the internet, television and mobile phones. They did not own a computer and did not use one and, accordingly, believed they should not be required to file their VAT returns via the internet. HMRC took the view that their choice not to use a computer was really a personal preference and not a fundamental requirement of their religion. However, the taxpayers maintained that they had to act in accordance with their own consciences and, on that basis, they would not file the returns online and, indeed, would deregister rather than be forced to do so.
The relevant law giving HMRC the power to make secondary legislation requiring VAT registered persons to file online is contained in FA 2002, Finance Act 2002 section 135s. 135. HMRC laid secondary legislation before Parliament in accordance with its powers under s. 135 and this became reg. 25A of the Value Added Tax Regulations 1995 (1995/2518). Regulation 25A(3) provides that a person who is registered for VAT must make a return using an electronic return system. However, under reg. 25A(6)(a) a person who HMRC are satisfied is a practising member of a religious society or order whose beliefs are incompatible with the use of electronic communications is not required to make a return using an electronic return system. HMRC's position was that the taxpayers were not members of a religious society or order whose beliefs are incompatible with the use of electronic communications; it was their own personal beliefs that prevented them from using electronic communications. The tribunal agreed with HMRC that reg. 25A(6)(a) did not in itself entitle the taxpayers to religious exemption from filing online.
The next question for the tribunal was whether the Human Rights Act 1998 was relevant in determining the appeal. Human Rights Act 1998 section 3Section 3 of the Act provides that so far as it is possible to do so, primary legislation and subordinate legislation must be read and given effect in a way which is compatible with the European Convention on Human Rights ("the Convention"). It was HMRC's position that their decision did not breach the appellants' human rights. Article 9 of the Convention provides that everyone has the right to freedom of thought, conscience and religion and that freedom to manifest one's religion or beliefs shall be subject only to such limitations as are prescribed by law and are necessary in a democratic society in the interests of public safety, for the protection of public order, health or morals, or for the protection of the rights and freedoms of others. The question for the tribunal was whether the online filing regulations interfered with the taxpayers' right to manifest their religion and beliefs in practice and observance. The tribunal found that using a computer, or having an agent use it on their behalf, was contrary to the taxpayers' religious beliefs and that they were manifesting their religious beliefs by refusing to use computers. HMRC submitted that there was an insufficient nexus between this manifestation of religious belief and the underlying fundamental beliefs of the Seventh-day Adventist Church. The tribunal acknowledged that the Convention requires there to be a "close and direct nexus" between the manifestation and the underlying belief, but was satisfied that such a close and direct nexus existed in this case.
HMRC pointed to authority in the case of Cha'are Shalom Ve Tsedek v France (ECHR 27417/95) that the Convention does not find there to be an interference with the right to manifest a person's religion if that person is able to take steps to circumvent a limitation placed on his or her freedom to manifest religion or belief. HMRC submitted that the taxpayers could circumvent the need to use a computer to file online by utilising a computer at a public library or employing an agent to file returns on their behalf. The tribunal rejected this proposition. It was as much against the taxpayers' conscience to use a public computer or to ask another person to use a computer on their behalf as to have a computer in their home. In the view of the tribunal, the requirement to file online was a restriction under art. 9(1) in so far as the taxpayers were concerned in their right to manifest their religion. The second part of any case on Convention rights is to consider whether the restriction is justified. Article 9(2) sets out the grounds on which a restriction on the right to manifest religion may be justified. HMRC accepted that none of the grounds in art. 9(2) could apply and they did not seek to justify the restriction. Therefore, the tribunal found that reg. 25A was in breach of the taxpayers' art. 9 rights. On an ordinary interpretation of reg. 25A(6)(a), the taxpayers were unable to have the benefit of exemption, but a "strained" interpretation brought the taxpayers within the exemption contained in that regulation. Accordingly, the appeal was upheld.
This decision adds to findings of the tribunal in recent cases that online filing breaches taxpayers' rights under the European Convention on Human Rights. The tribunal speculated that there may be other breaches of Convention rights arising from the policy of digital mandation, including indirect discrimination by failing to make an exemption for persons in a significantly different position and direct discrimination against persons with certain religious beliefs. The tribunal also observed that the same decision might have been reached had the case been heard under European Union law and the requirement for proportionality. The tribunal's comments might deter HMRC from pursuing an appeal against the decision.
For commentary on the online filing of returns see the CCH VAT Reporter at 55-210.
[1]The appellants trade in partnership as beekeepers. They are VAT registered.
[2]Compulsory VAT online filing was introduced for all businesses with a turnover of over £100,000, and any newly registered business, with effect from 1 April 2010 and for all businesses with effect from 1 April 2012. HMRC refers to businesses liable to registered for online filing from 1 April 2010 as "first tranche" and those only required to be registered from 1 April 2012 as "second tranche".
[3]The appellants in this case were in the second tranche. Their turnover was below the limit for tranche 1. Their VAT registration is in any event voluntary as their supplies (of honey) are zero rated. They chose to be VAT registered as it enables them to recover the input tax (VAT) charged on supplies made to them in the course of their business, such as VAT on the cost of the jars.
[4]By letter dated 3 March 2012 the appellants' claim for exemption from online filing on religious grounds was refused by HMRC, although no reasons were given for the refusal. Mr Blackburn asked for a review of this decision, and by letter dated 4 May 2012 the original decision was upheld on review. This time, HMRC gave reasons. The letter stated:
My finding is that a case for exemption has not been made at review stage. No connection to the beliefs of any individual religious society or order has been shown in the way contemplated by the regulation. The wording in the regulation looks to be a very precise requirement for exemption and has to be construed according to the words which have been used. It is not my belief that there was an intention to broaden the basis of exemption to include constructions of scripture which fall outside the tenets of a definable faith. If that had been so then the statute would not have been worded as it is.
[5]The appellants appealed to the Tribunal. The Tribunal stood the appeal behind the joined cases of EweidaENR (Applications nos. 48420/10, 59842/10, 51671/10 and 36516/10) [2013] ECHR 37 in the European Court of Human Rights ("the ECHR"). The ECHR released its judgment in those cases earlier this year and this case (after one postponement) came on for hearing.
[6]Evidence was given by Mr Blackburn. Mrs Blackburn concurred in what her husband said. Mr Woolfe did not seek to challenge Mr & Mrs Blackburn's evidence of their beliefs and I accept that Mr Blackburn accurately represented their...
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Exmoor Coast Boat Cruises Ltd
...not there.Whose beliefs are incompatible…[43] Mr Wibberley considered that my decision in Blackburn (t/a Cornish Moorland Honey) TAX[2013] TC 02913 on the interpretation of s 25A(6)(a) at was right, for the reasons there given, and in particular that it is the beliefs of the of the religiou......