VAT online filing rules relaxed by HMRC

Wednesday 7 May 2014

Limited companies will no longer have to strictly file their VAT returns online, following a recent consultation.

HM Revenue and Customs (HMRC) has agreed to relax the rules that state the tax has to be submitted over the internet.

This comes after LH Bishop Electric Co Ltd and Others v HMRC Commissioners, which lead to a consultation on the process.

In the case, the First-tier Tribunal ruled in favour of the appellants, who had appealed notices to file online on the basis that they would face difficulty doing so because of their age, disability or proximity to easy internet access.

This resulted in a consultation and proposals by HMRC that businesses could use the telephone when filing if it is not reasonably practicable to do so online due to the age of the individual, disability, remoteness of location or any other reason.

In instances where it is not practicable to file electronically or by telephone, individuals will be able to do so on paper.

Parties aggrieved by HMRC's decision to refuse telephone or paper filing will continue to have the right to appeal.

Anthony Thomas, chairman of the Low Incomes Tax Reform Group, said: "This is a good outcome to an open consultation and we are pleased that HMRC have listened to those who responded."

"Until now, online returns have been mandatory unless the taxpayer is a practising member of a religious society or order whose beliefs are incompatible with the use of electronic communications, or a business in insolvency," he continued.

"In the Bishop case the judge found that requirement breached the human rights of those who were unable to file online because they were computer illiterate due to age, or had a disability that made using a computer accurately very difficult or painful, or they lived too remotely for a reliable internet connection."

However, Mr Thomas added that it was regrettable that it took two years and an expensive court case to reach this point.

A further consultation is now taking place on draft amendments to the VAT Regulations to action the change. Views and opinions will be sought until May 24th, when the consultation will close.

All limited companies and contractors must register for VAT. The levy has been known to improve cash flow for certain businesses that charge VAT on sales and claim back on purchases.

This applies to those that sell zero-rated items and buy standard-rated items. In this case, an individual will receive a VAT refund from HMRC.

If a limited company has not sold anything yet or will not sell anything during a VAT accounting period they may be able to claim VAT back on purchases.

Individuals can apply to backdate voluntary VAT registration by up to four years. To do this, the business in question will need to account for VAT on any VAT taxable supplies made after the chosen date. It will not be possible to reclaim VAT on purchases unless there is the right evidence in place and other conditions have been met.

By Victoria McDonnell

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