Garrod
| Jurisdiction | UK Non-devolved |
| Judgment Date | 15 July 2015 |
| Neutral Citation | [2015] UKFTT 353 (TC) |
| Date | 15 July 2015 |
| Court | First Tier Tribunal (Tax Chamber) |
Judge Barbara Mosedale
The Appellant appeared in person
Aparna Nathan, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the Respondents
Value added tax – Online filing – Obligation to tick a box stating taxpayer had read HMRC's terms and conditions for online filing – Whether tribunal had jurisdiction to consider whether lawful for HMRC to impose the obligation – Yes – Whether it was lawful – No – Penalty for not filing online discharged.
The First-tier Tribunal (FTT) discharged a £100 penalty for failure to file an electronic VAT return finding that HMRC's imposition of a compulsory requirement that taxpayers tick a box to say they have read HMRC's terms and conditions as part of signing up to the Government Gateway was unlawful. As Mr Garrod's refusal to tick the box was the cause of his failure to file online, the penalty was not lawfully imposed and must be discharged. Additionally, the unlawfulness of the tick box pre-condition to filing an online return also gave Mr Garrod a “reasonable excuse” for refusing to tick it and filing by another means.
Mr Garrod was a barrister who had appealed to the FTT against a £100 penalty for failure to submit an electronic VAT return. Mr Garrod had submitted paper VAT returns instead of electronic returns because he refused to sign up to the Government Gateway (enabling him to file electronic returns) because in doing so he was required to tick a box saying that he had read HMRC's terms and conditions for online filing. Mr Garrod had not actually read the terms and conditions but objected, in principle, to any terms and conditions being imposed as well as to their quantity which he said would be burdensome to read.
The issues that this raised for consideration by the FTT were essentially:
a) whether HMRC was unlawful in requiring Mr Garrod to read “terms and conditions” so that Mr Garrod was not in breach of any lawful requirement;
b) whether Mr Garrod had a reasonable excuse for failing to submit an electronic return because it was reasonable to refuse to read the terms and conditions because HMRC had no power to make this a pre-condition of online filing.
The first question raised the issue as to whether the Tribunal had jurisdiction to consider matters of public law and whether HMRC acted lawfully in imposing the condition. The FTT concluded that it did have jurisdiction to consider whether the imposition of the requirement to tick the box was unlawful and that it also had jurisdiction to consider the legality of the secondary legislation under which it was purported to have been imposed.
The FTT noted that the Finance Act 2002 (“FA 2002”), s. 135(2)(a) gave HMRC power to make regulations “as to the electronic form to be taken by information delivered to the Revenue and Customs using electronic communications” (i.e. as to the electronic form of a VAT return) and SI 1995/2518, reg. 25A(8) provided an electronic return “must take a form approved by the Commissioners in a specific or general direction”.
However, the FTT found that SI 1995/2518, reg. 25A(8) did not provide authority for the tick box pre-condition (as HMRC had contended) because the tick box was not actually part of the VAT online form, it was a precondition to being in a position to file a VAT online form and although FA 2002, s. 135(2)(d) gave HMRC the power to set out pre-conditions in Regulations, HMRC had not exercised that power.
In this case, primary legislation had empowered HMRC to do something by regulation (prescribe the form of the electronic VAT return) but HMRC had used this authority to make a regulation empowering itself to do that something by tertiary legislation. FA 2002 gave HMRC no power to do that, so the online form of the VAT return, as it was not specified in Regulations, was not within FA 2002, s. 135(2)(a). This meant that not only was the tick box not part of the online return at all, but the form on HMRC's website for online returns was not a form authorised by Parliament because it was not made by Regulations and, therefore, any taxpayer bound to make an online return could do so by any electronic means and was not required to do it via the Government Gateway at all.
As for the penalty itself, the FTT concluded that HMRC seeking to impose the tick the box pre-condition was unlawful in these circumstances and so in line with Wandsworth London Borough Council v Winder ELR[1985] AC 461 and Boddington v British Transport Police ELR[1999] 2 AC 143, in which the House of Lords ruled that a member of the public has no liability where liability depends on the prior unlawful act of a public authority, the penalty was not lawfully imposed and must be discharged.
Finally, although not necessary to dispose of the appeal, the FTT continued to consider the question of whether Mr Garrod had a “reasonable excuse” for failing to submit an electronic return, noting initially that Mr Garrod had not actually read the terms and conditions before refusing to sign up to them, which did not appear to be reasonable conduct. However, the test of reasonable excuse was objective and so the question was if he had read them, would it have been reasonable for him to refuse to tick the box? The FTT had already found that the terms and conditions went further than a summary of the statutory/regulatory position (as HMRC had contended) and created obligations on the taxpayers, the right for HMRC to communicate by means of a mailbox, as well as restricting HMRC's liability with regard to the online service. These were matters a taxpayer might reasonably object to and as HMRC had no right to insist upon them, it was reasonable for a taxpayer to refuse to tick the box that included them. Accordingly, the unlawfulness of the tick box precondition also gave Mr Garrod a reasonable excuse for refusing to tick it and filing by another means.
The appeal was allowed.
In this case, Mr Garrod (a barrister) refused to sign up to the Government Gateway because he objected to being required to tick the box saying he had read HMRC's terms and conditions for online filing (even though he had not actually read the terms and conditions). This meant he could not file his VAT returns online so instead he submitted paper returns and HMRC imposed a £100 penalty for failing to file an online return. The FTT has allowed Mr Garrod's appeal finding that HMRC were not lawful in imposing this pre-condition to online filing which meant the penalty was not lawfully imposed and Mr Garrod also had a “reasonable excuse” defence. However, the FTT further found that the form on HMRC's website for online returns was not actually a form authorised by Parliament as it was not made by Regulations, which meant any taxpayer bound to make an online return, could do so by any electronic means and was not required to do it via the Government Gateway.
[1] The appellant is a barrister in practice. He is required to submit VAT returns. He failed to submit an electronic VAT return by the due date for the VAT quarter 06/12, but did submit it by paper. This led to correspondence with HMRC but he continued to refuse to make online returns making paper returns instead. Ultimately HMRC imposed a penalty of £100 on him 16 July 2013 for failure to make an online return in the period 03/13. Mr Garrod requested a review of the penalty; one was carried out but upheld the issue of the penalty. This appeal is against that review decision dated 6 January 2014.
[2] The appeal was lodged late because Mr Garrod initially sent it to HMRC rather than HMCTS; HMRC did not object to the appeal being lodged late and I admitted it at the hearing.
[3] Briefly, the dispute between the parties was this. Mr Garrod is prepared to use the internet to submit his returns online; what he would not do was to submit his return online because he was unable to do so without signing up to the “Government Gateway” which required him (electronically) to tick a box stating that he had read HMRC's terms and conditions for online filing.
[4] Mr Garrod gave evidence in the form of a witness statement; it was largely untested but in cross examination he stated that he had a computer and was able to use it. Mr Garrod filed his own VAT returns. He had an adviser who filed his income tax returns online and he assumed that his adviser did sign up to the terms and conditions in the Government Gateway that he himself had refused to be a party to when filing his VAT returns.
[5] A significant part of Mr Garrod's witness statement outlined various letters and conversations between himself and HMRC over this issue, which caused him to make complaints to HMRC over what he considered to be unprovoked abuse. It is no part of Tribunal's remit to consider whether his complaints were justified and I did not do so. I make no findings in respect of that part of his witness statement.
[6] He also expressed opinions in his witness statement. I do not accept these as evidence. In so far as his evidence was factual and relevant to the issue before me, it was accepted.
[7] Apart from Mr Garrod's written and oral testimony, the evidence before the Tribunal comprised print outs of the terms and conditions in the Government Gateway and copies of letters between the parties.
[8] There was little dispute on the facts. I find that the only reason that Mr Garrod had not filed his VAT return online was that he was first required to sign up to the Government Gateway, and that to do so, he had to (electronically) tick a box indicating that he had read HMRC's terms and conditions for online filing. Mr Garrod had refused to do so. I find as a fact that the reason and only reason Mr Garrod failed to file online was because he refused to tick the box stating he had read HMRC's terms and conditions for online filing.
[9] His objection was to the terms and conditions; he did not object to...
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