A self-employed barrister has overturned a £100 penalty issued by HMRC for failing to submit an online VAT return on the grounds that an earlier requirement to read HMRC’s terms and conditions relevant to online filing procedures was unlawful.
As set out in the decision on Neil Garrod v HMRC (TC4537), the barrister had no objection to submitting online returns, but did object to the requirement to tick a box when signing up on the government gateway to confirm that he had read HMRC’s terms and conditions for online filing.
When he submitted paper VAT returns instead in 2012 and 2013, he was hit with a £100 penalty from HMRC in July 2013 for failing to submit an electronic return for the March 2013 quarter.
Garrod complained about “unprovoked abuse” by HMRC (an issue not considered by the First-tier Tribunal chairman Barbara Mosedale) and objected to the quantity of the terms and conditions, which he felt would be “burdensome to read”.
The judge acknowledged that the terms ran to over 12 A4 pages of “fairly close print” and raised concerns conditions imposed on taxpayers such as, “you should regularly check your mailbox and delete old messages” - referring to the mailbox is hosted on HMRC’s website that the department uses to communicate with taxpayers.
HMRC argued that taxpayers did not need to agree to the terms and conditions, only to confirm they had been read, and that the content was only confirming details within primary and secondary legislation.
Mosedale disagreed and said that “the terms and conditions went beyond being a recital of the law”. She considered the legislation and concluded that HMRC had no power to impose it at all.
She added: “So seeking to impose the tick the box pre-condition was in these circumstances unlawful. As the failure to tick the box was the cause of Mr Garrod’s failure to file online… the penalty was not lawfully imposed and must be discharged.” (para 139)
To rub salt into HMRC’s wounds, Mosedale also concluded that Mr Garrod had a “reasonable excuse” for not submitting online returns, so the penalty was invalid on this basis as well.
VAT enthusiasts will note that this is the third time that Mosedale has given HMRC a black eye on the issue of their powers and procedures. In the case of LH Bishop Electrical Company Ltd and others (TC2910), she ruled that the requirement for old and disabled people to file VAT returns online was a breach of human rights legislation. And in the case of Giu Hui Dong (TC3502), she concluded that the tribunal had the power to consider the legality of secondary legislation.
On a practical level, how many taxpayers actually read the terms and conditions of HMRC’s online procedures when they sign up with the government gateway? The answer is probably very few, if any. So is it time for HMRC to rethink their procedures and take account of the views expressed by Mosedale in her decision?