[2013] UKFTT 524 (TC)
TC02912
Appeal number:
TC/2012/3904
VAT – purported appeal
against “decision” of HMRC that appellant required to make online VAT returns –
liability to file online arising automatically under secondary legislation
without requirement for HMRC to reach a “decision”- whether the European
Convention on Human Rights relevant - no – appeal struck out for lack of
jurisdiction
FIRST-TIER TRIBUNAL
TAX CHAMBER
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LE BISTINGO
LIMITED
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Appellant
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- and -
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THE
COMMISSIONERS FOR HER MAJESTY’S
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Respondents
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REVENUE &
CUSTOMS
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TRIBUNAL:
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JUDGE BARBARA MOSEDALE
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Sitting in public at Bedford Square , London on 19 December 2012 with written submissions from HMRC dated 6
September 2013. The appellant was invited to make written submissions but did
not do so.
Mr S Gigliucci, Director of
the Appellant, for the Appellant
Mr A McNab, Counsel, and Mr P
Woolfe, Counsel, instructed by the General Counsel and Solicitor to HM Revenue
and Customs, for the Respondents
© CROWN COPYRIGHT
2013
DECISION
1.
The appellant filed a Notice of Appeal on 21 February 2012. It
purported to be an appeal against a letter received by it from HMRC dated 8
February 2012.
2.
The 8 February 2012 letter was a “VATC1A” letter and appeared to be in a
standard form. It was a long letter and I only reproduce parts of it. It was
headed
“Important change: from 1 April 2012, virtually
all VAT customers will be required to file VAT returns online and pay VAT
electronically – or they may face penalties
…..
1. important information
·
For VAT periods starting on or after 1 April 2012, virtually all
VAT customers must file their VAT returns online and pay any VAT due
electronically….
·
There will be two, very limited, categories of customer
who, by law, are not required to file online. These are (a) businesses subject
to an insolvency procedure; and (b) businesses run exclusively by people who
are practising members of a religious group whose beliefs are incompatible with
the use of computers….
·
……
2. You must act NOW
(here followed instructions about how to register
for online filing)
3. Help and support
Filing online is quite straightforward, and if you
need help, there’s plenty available…..
4. What to do if you think you are not required
to file online.
If you feel that you fall into one of the two very
limited categories of customers who are not required to file online, you should
write to HMRC [address given]. You should explain in your letter which
exemption you think applies to you, and provide any information that you think
is relevant.
…..”
3.
HMRC applied on 10 July 2012 to have the appeal struck out under Rule
8(2)(a) on the grounds that the Tribunal had no jurisdiction in respect of it.
This was on the basis that HMRC had taken no decision in respect of the Appellant’s
liability to file its VAT returns online as this was contained in legislation.
The Tribunal is a statutory body and only has jurisdiction in respect of
decisions made by HMRC over which the Value Added Tax Act 1983 (“VATA”) gives
it jurisdiction.
4.
There have been a number of other cases in which such a strike out
application was filed and this appeal was the first of them to be heard.
The legislation
5.
Section 25 of the Value Added Tax Act 1994 (“VATA”) provides that a
taxable person shall account for and pay VAT by reference to prescribed
accounting periods and “in such time and manner as may be determined by or
under regulations”.
6.
Regulation 25 of the Value Added Tax Regulations 1995 (“the Regulations”),
as amended by the Value Added Tax (Amendment) (No. 4) Regulations 2009/2978 with
effect from 1 December 2009, provides:
“(1) Every person who is registered …. shall, in
respect of every period of a quarter……, not later than the last day of the
month next following the end of the period to which it relates, make to the
Controller a return in the manner prescribed in regulation 25A showing the
amount of VAT payable by or to him …..”
7.
Regulation 25A provides (with effect from 1 April 2012):
25A.—
...
(3) Subject to paragraph (6) below, a person who is
registered for VAT must make a return required by regulation 25 using an
electronic return system ....
...
(6) A person—
(a) who the
Commissioners are satisfied is a practising member of a religious society or
order whose beliefs are incompatible with the use of electronic communications,
or
(b) to whom an
insolvency procedure as described in any of paragraphs (a) to (f) of section
81(4B) of the Act5 is applied
is not required to make a return required by
regulation 25 using an electronic return system.
…
(15) Subject to paragraph (15A) in relation to
returns made for prescribed accounting periods which end on or after 31 March
2011, a person who fails to comply with paragraph (3) above is liable to a
penalty.
….
(16) But a person who has a reasonable excuse for so
failing to comply is not liable to a penalty.
...”
8.
Prior to 1 April 2012, and since 12 December 2009, Regulation 25A(5)
had provided that a person was only a specified person in relation to
electronic returns if his turnover equalled or exceeded £100,000 and then
only if “that person has been notified as required by paragraph (7)”.
Paragraph 25A(7) required HMRC to notify a person if they considered him to be
a specified person.
9.
Some persons, including the appellant’s director Mr Gigliucci in his
personal capacity, have lodged appeals against such decisions made by HMRC.
HMRC has not asked the Tribunal to strike these appeals out on the grounds of
lack of jurisdiction nor has the Tribunal done so of its own motion: on the
contrary, the Tribunal is has heard four of these “tranche 1” appeals as lead
cases. In those cases, the lawfulness of the decisions made by HMRC is
challenged. The decision of the Tribunal is issued simultaneously with this
one: L H Bishop Electric Company Ltd and others .
10.
However, the appellant did not receive such notification under
Regulation 25A(7) as it was. I presume this was because HMRC did not consider
it to be a specified person on the grounds its turnover was less then
£100,000. HMRC’s case is that since the amendment of Regulation 25A with
effect from 1 April 2012, there was no such notification requirement. HMRC’s
case is that since that date the appellant’s liability to make an electronic
return followed automatically under the new version of Regulation 25A and,
unlike the earlier version of Regulation 25A, did not require a decision to be
made by HMRC. This is, as HMRC describe it, a Tranche 2 case, and one which
HMRC say the Tribunal has no jurisdiction to hear.
The FTT’s Jurisdiction
12. The FTT’s jurisdiction is
statutory. It has no jurisdiction to hear any dispute which does not fall
within the statutory provisions that confer jurisdiction upon it.
13. Section 83(1)(zc) VATA 94
provides as follows:
(1) Subject to sections 83G and 84, an appeal shall lie
to the tribunals with respect to any of the following matters—
...
(zc) a decision of the Commissioners about
the application of regulations under section 135 of the Finance Act 2002
(mandatory electronic filing of returns) in connection with VAT (including, in
particular, a decision as to whether a requirement of the regulations applies
and a decision to impose a penalty).
11.
The appellant’s complaint concerns the application of Regulation 25A to
him. Regulation 25A is a regulation made under section 135 FA 2002. Not only
does regulation 25A provide that an appeal in respect of it must fall within s
83(1)(zc) there is no other applicable provision in s 83 which would confer
jurisdiction on this Tribunal to hear the appellant’s complaint.
12.
And, as HMRC state, the scope of s 83(1)(zc) is circumscribed by the
requirement that HMRC issue a decision. I agree with HMRC that s 83(1)(zc) is
in particular to be read as limiting the Tribunal’s jurisdictions to decisions
of HMRC in respect of online filing. This includes jurisdiction over a
decision of HMRC whether a requirement of the regulations applies and a
decision to impose a penalty.
13.
No penalty has been imposed. It is HMRC’s case that no decision at all
has been made: its letter of 8 February merely informed the appellant of the
law and in particular the legal requirement to file online. The letter was not
a decision that the appellant should file online: the appellant was
already liable under the secondary legislation outlined above to file online
whether or not the letter was sent.
14.
I have to agree that HMRC has made no decision in this case against
which an appeal could lie. The appellant did not suggest otherwise to me in
his submissions: this is a technical area of law and that is not surprising.
Mr Gigliucci’s case is that the law ought not to require him to file online.
Does the Convention on Human Rights apply to give a right of appeal?
15.
This case was heard after the first six days of the hearing in the
“tranche 1” lead cases, behind which Mr Gigliucci’s appeal in his personal
capacity is stood. The hearing of the tranche 1 lead cases was not concluded
until February 2013 and the decision is only just published. I delayed the
issue of the decision in this case to ensure that my decision on submissions
made by counsel in the tranche 1 case were consistent with the decision in this
case: consistency is particularly important in that Mr Gigliucci has an
interest in both sets of proceedings and in any event the delay was, as I
understand, of no prejudice to the appellant in that HMRC do not seek penalties
for non compliance in the so-called VAT online cases pending the decisions in
the appeals.
16.
Mr Gigliucci did not make submissions on the Convention on Human Rights
in this case but such submissions were made in the tranche 1 case. As I
considered them of potential relevance to this case, I gave both Mr Gigliucci
and HMRC the opportunity to make such submissions on paper on them in this case.
HMRC did so but not Mr Gigliucci. I now set out the conclusions I have reached
on the relevance of the Convention to this case.
17.
The Human Rights Act s 3 requires this Tribunal to interpret UK law in so far as possible to be consistent with the rights contained in the Convention:
“So far as it is possible to do so, primary and
subordinate legislation must be read and given effect in a way which is
compatible with Convention rights”.
18.
The effect of s 83(1)(zc) VATA is that the appellant unable to test in
this Tribunal whether the obligation contained in Regulation 25A to file online
is lawful. It is his case that it is not lawful. The reason s 83(1)(zc) has
this effect is because it is limited to ‘a decision’ of HMRC and the obligation
in Regulation 25A applies irrespective of any decision by HMRC.
19.
Article 6 of the Convention nevertheless provides:
“In the determination of his civil rights and
obligations or of any criminal charge against him, everyone is entitled to a
fair and public hearing within a reasonable time by an independent and
impartial tribunal established by law.”
20.
The appellant wants this Tribunal to determine whether he does have an
obligation to file online. HMRC’s view is that firstly, that Article 6 does
not apply because the obligation to file tax returns is not a civil obligation;
and secondly, even if the obligation to file tax returns was a civil
obligation, nevertheless Article 6 could not confer jurisdiction on this
Tribunal where otherwise it would have none.
21.
Is filing a tax return a civil obligation? In Ferrazzini v Italy [2001] STC 1314 the European Court of Human Rights (“ECHR”) held that tax
disputes fell outside the scope of civil rights and obligations because tax was
a public law matter. In a common law jurisdiction, this is a very difficult
decision to understand but nevertheless I am bound to apply it: this is
because s 2 Human Rights Act requires me to take account of any relevant
judgment of the ECHR.
22.
The effect of Ferrazzini is that the Convention does not
guarantee a fair trial in a tax dispute. Therefore, s 3 HRA cannot require a
strained reading to be given to s 83(1)(zc) in order to give the appellant a
right to a hearing of his challenge to the legality of Regulation 25A.
23.
If it were not for the Ferrazzini case, my view might have been
that s 3 HRA would require “decision” in S 83(1)(zc) to be given a strained
reading and to include the letter written by HMRC to the appellant referred to
in paragraph § 2 above. This is because, unless it was given such a meaning it
would leave the appellant without an effective means to challenge the legality
of Regulation 25A. Yet Article 6 entitles a person to a fair hearing. In
practice, if this Tribunal does not have jurisdiction in this case, all the
appellant could do would be to wait for HMRC to impose a penalty for
non-compliance and then appeal it: this is obviously unsatisfactory as it
requires the appellant to break the law in order to determine whether the law
itself is lawful. Further, while the legality of legislation could be
challenged in judicial review proceedings, such actions are not of right and in
a case like this, which does not involve significant sums of money and legal
advice, is not in practice an option, and therefore not an effective remedy.
24.
Unfortunately, I am bound by the decision in Ferrazzini and have
to conclude that s 3 HRA does not require s 83(1)(zc) to be interpreted in such
a way to give this Tribunal jurisdiction in order to give effect to rights
under Article 6 of the Convention.
25.
In addition to the European Convention on Human Rights there is the Charter
of Fundamental Rights of the European Union, which applies because this is a
VAT case and the European Communities Act 1972 gives supremacy to EU law.
Article 47 of the Charter grants the right to a fair trial in all matters and
it does not suffer from the Ferrazzini limitation. However, s 3 HRA
applies only to the Convention and not to the Charter. While the taxpayer has
the right under the Charter to a fair hearing, that does not give this
Tribunal the power to “interpret” legislation to grant itself the
jurisdiction to give the taxpayer a fair hearing where the legislation does not
give it jurisdiction on an ordinary reading.
26.
Therefore, while it seems it is unlawful for the UK government under the
Charter (applicable in the UK because of the ECA) to impose obligations on a
taxpayer without giving the taxpayer a right to challenge them, that does not
permit this Tribunal to confer jurisdiction on itself in order to give
taxpayers the right to challenge the obligation.
Conclusions
27.
Mr Gigliucci may find it very surprising that this Tribunal does not
have jurisdiction to entertain his appeal and consider the validity of the
law: this is particularly the case when in his personal capacity as a VAT
registered trader his appeal has been accepted as valid. But, as I have said,
that was because tranche 1 mandation required an HMRC decision. Tranche 2 does
not.
28.
The only decisions HMRC could reach in respect of a Tranche 2 mandation
would be whether a taxpayer was entitled to the insolvency or religious exemption
or to impose a penalty. The appellant has laid no claim to either of these
exemptions and no penalty has been imposed. HMRC has simply taken no decision
at all in respect of the appellant’s liability to file online.
29.
While technically a person in the appellant’s position could seek to
judicially review HMRC over the legality of the secondary legislation, in
practice the expense and difficulty of such a course of action to a person of
small resources means that this is an unreal remedy.
30.
It seems to me that the only practical way that the appellant would have
of obtaining a judicial ruling on its grievance over the requirement that it
must file online is to appeal any penalty imposed if it fails to comply with
the law. But that, as I have said, is equally unsatisfactory as it requires
the appellant to break the law in order to challenge it.
31.
So it is with a great deal of regret that I have to agree with HMRC that
the requirement on the Appellant to file VAT returns online, to which the
Appellant objects, is contained in legislation and applies directly, without
the need for any decision on the part of HMRC. HMRC have not even purported to
make a decision that the appellant must file online: their letter of 8
February 2012 were no more than notification to the appellant of its liability
under the legislation. As this Tribunal only has jurisdiction to entertain
appeals against decisions made by HMRC, it has no jurisdiction to
consider the appellant’s complaint in this case and must strike out the appeal.
32.
Nevertheless, it follows from what I have said in my decision on tranche
1 mandation (see L H Bishop Electric Company Ltd and others) that the
regulation complained of is not lawful in respect of elderly and/or disabled
taxpayers.
33.
This document contains full findings of fact and reasons for the
decision. Any party dissatisfied with this decision has a right to apply for
permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure
(First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be
received by this Tribunal not later than 56 days after this decision is sent to
that party. The parties are referred to “Guidance to accompany a Decision from
the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this
decision notice.
BARBARA
MOSEDALE
TRIBUNAL JUDGE
RELEASE DATE: 2 October 2013
