Mr John Bryning
HM Revenue & Customs
Indirect Tax Process Team
1st Floor Regian House
James Street
Liverpool L75 1AD
23 May 14
Dear John,
Comments on draft Regulations amending the Value Added Tax Regulations 1995
We refer to the summary of responses and technical consultation document (the Document) published on 22 April 2014 relating to VAT: amendments to legislation – assistance with electronic filing of VAT returns, a copy of which is attached. As noted at Annex B of the Document, the Association of Accounting Technicians (AAT) responded to the original consultation document published on 20 December 2013.
Paragraph 3.1 of the Document indicates that HMRC would welcome comments on the draft Regulations included at Annex A of the Document, in particular on whether the draft Regulations achieve the policy intention set out in paragraphs 2.7-2.9 and 2.14 of the Document. AAT welcomes the opportunity to comment on the draft Regulations on behalf of our membership and from the wider public benefit perspective of achieving sound and effective administration of taxes.
Before turning to the question of whether the draft Regulations achieve the policy intention set out in paragraphs 2.7-2.9 and 2.14 of the Document we are pleased to note that the draft Regulations included at Annex A of the Document, would, if implemented, amend regulation 25A(6) of the VAT Regulations 1995 to provide for an additional category of persons who are not required to make a return using an electronic return system, namely persons for whom the Commissioners are satisfied that it would not be reasonably practicable to make a return using an electronic return system for reasons of disability, age, remoteness of location or any other reason.
We turn now to the question of whether the draft Regulations achieve the policy intention set out in paragraphs 2.7-2.9 and 2.14 of the Document.
1Paragraph 2.7 of the Document
1.1.Paragraph 2.7 of the Document suggests that the draft Regulations clarify that telephone filing is an alternative form of electronic filing that will be available to certain businesses. The phrase ‘telephone filing’ appears three times in the explanatory note to the draft Regulations but does not appear anywhere in the text of the draft Regulations.
1.2.It is not apparent from the text of the draft Regulations that telephone filing is an alternative form of electronic filing and it is not clear how telephone filing could ever be an alternative form of electronic filing. Regulation 25A of the VAT Regulations 1995 relates to taxpayers making returns and, as noted at paragraph 454 of the Tribunal report in L H Bishop (TC02910), as a matter of law it is impossible for an HMRC officer to be an agent of the taxpayer.
1.3.An HMRC officer entering figures onto a computer when the figures are provided by a taxpayer over the telephone is no more an agent of the taxpayer than an HMRC officer entering figures onto a computer when the figures are provided by a taxpayer using a paper return system. In neither case is the HMRC officer acting as an agent of the taxpayer. In neither case has the taxpayer made a return using an electronic return system.
1.4.It may be possible to achieve the policy intention set out at paragraph 2.7 of the Document if regulation 25A(4) was amended by adding the words ‘or a telephone return system’ after the words ‘a paper return system’. However, we do not agree that the current draft Regulations achieve the policy intention set out in paragraph 2.7 of the Document.
2Paragraph 2.8 of the Document
2.1.Paragraph 2.8 of the Document explains that the amendments to the VAT Regulations will provide that businesses that satisfy HMRC that they meet certain criteria will not be required to file their VAT returns using an electronic return system. Those criteria will be that it is not reasonably practicable for them to use either the current method of electronic filing or telephone filing on account of age, disability, remoteness of location, or any other reason.
2.2.We agree that regulation 5 of the draft Regulations, which amends regulation 25A(6) of the VAT Regulations 1995 by providing for an additional category of persons who are not required to make a return using an electronic return system, namely persons for whom the Commissioners are satisfied that it would not be reasonably practicable to make a return using an electronic return system for reasons of disability, age, remoteness of location or any other reason, achieves the policy intention set out in paragraph 2.8 of the Document.
3Paragraph 2.9 of the Document
3.1.Paragraph 2.9 of the Document explains that HMRC proposes that, where HMRC decides that a business does not meet the criteria for exemption from electronic filing, that decision will be an appealable decision under VATA 1994 section 83 (zc). We welcome this proposal, but, as the proposal is not included in the draft Regulations, we do not agree that the draft Regulations achieve the policy intention set out in paragraph 2.9 of the Document.
4Paragraph 2.14 of the Document
4.1.Paragraph 2.14 of the Document explains that HMRC intend that a business that wishes to file by telephone will have to satisfy HMRC that it is not reasonably practicable for it to use the ‘current online method of electronic filing’ on account of age, disability, remoteness of location or any other reason. We understand that ‘the current online method of electronic filing’ in the context of paragraph 2.14 is filing by computer.
4.2.The draft Regulations provide for the categories of persons referred to in paragraph 2.14 of the Document, for whom it would not be reasonably practicable for them to use the ‘current online method of filing’, to be provided for within regulation 25A(6). However, providing for such persons within regulation 25A(6), without also amending regulation 25A(4), would have the effect of requiring those persons to make a return using a paper system. It may be possible to achieve the policy intention set out in paragraph 2.14 of the Document if regulation 25A(4) was amended by adding the words ‘or a telephone return system’ after the words ‘a paper return system’. However, we do not agree that the current draft Regulations achieve the policy intention set out in paragraph 2.14 of the Document.
5Further comments
5.1.The amendment to regulation 25A(4) of the VAT Regulations 1995 we have suggested at paragraphs 1.4 and 4.2 of this letter is made in the context of achieving the policy intention set out in paragraphs 2.7 and 2.14 of the Document. However, as explained in the following paragraphs, we do not recommend that regulation 25A(4) is amended.
5.2.Paragraph 2.27 of the Document explains that fewer than 150 businesses are currently authorised to use the telephone filing service. Paragraph 2.16 of the Document suggests that HMRC intend to make the telephone filing service available outside of normal working hours and provide a dedicated line to ensure that calls are answered promptly and dealt with by telephone filing experts. It is not clear how providing and improving what paragraph 2.7 of the Document refers to as ‘an alternative form of electronic filing’ will encourage businesses to use what paragraph 2.14 of the Document refers to as ‘the current online method of electronic filing’. Introducing the features referred to in paragraph 2.16 of the Document could involve significant cost and may have the unintended consequence of encouraging some businesses to try to meet the criteria to be allowed to use this new improved service.
5.3.In addition, we are not convinced that allowing businesses that meet certain criteria to file by telephone contributes anything to the wider public benefit of achieving sound and effective administration of taxes. In our opinion the paper return system already provided for by regulation 25A(4) of the VAT Regulations 1995 should be sufficient for the relatively small number of businesses to whom the amended regulation 25A(6) is likely to apply.
6Summary
6.1.AAT welcomes the draft Regulations at Annex A of the Document, which if implemented, would amend regulation 25A(6) of the VAT Regulations 1995 to provide for an additional category of persons who are exempted from electronic filing, namely persons for whom the Commissioners are satisfied that it would not be reasonably practicable to make a return using an electronic return system for reasons of disability, age, remoteness of location or any other reason.
6.2.AAT also welcomes the proposal, referred to in paragraph 2.9 of the Document, that a decision by HMRC that a business does not meet the criteria for exemption from electronic filing will be an appealable decision under VATA 1994 section 83 (zc).
6.3.AAT does not agree that the draft Regulations at Annex A of the Document achieves the policy intentions in relation to telephone filing referred to at paragraphs 2.7 and 2.14 of the Document. AAT also has concerns that improving the telephone filing service by introducing the features referred to in paragraph 2.16 of the Document could involve significant cost and may have the unintended consequence of encouraging some businesses to try to meet the criteria to be allowed to use this new improved service.
6.4.AAT anticipates that the amended regulation 25A(6) of the VAT Regulations 1995 will apply to a relatively small number of businesses and that the paper return system already provided for by regulation 25A(4) should be sufficient for those businesses.
7About the AAT
7.1.AAT is a professional accountancy body with over 50,000 full and fellow members and 75,000 student and affiliate members worldwide. Of the full and fellow members, there are 4,000 Members in Practice who provide accountancy and taxation services to individuals, not-for-profit organisations and the full range of business types. (Figures correct as at 31 March 2014)
7.2.AAT is a registered charity whose objectives are to advance public education and promote the study of the practice, theory and techniques of accountancy and the prevention of crime and promotion of the sound administration of the law.
7.3.Thank you for the opportunity to respond to the technical consultation document published on 22 April 2014 relating to VAT: amendments to legislation – assistance with electronic filing of VAT returns.
Further engagement
If you have any questions or would like to discuss any of the points in more detail then please contact the AAT at:
email: and
telephone: 020 7397 3088
Aleem Islan
Association of Accounting Technicians
140 Aldersgate Street
London
EC1A 4HY
Yours sincerely
Adam Harper
Director of Professional Development
t: +44 (0) 20 7397 3075
f: +44 (0) 20 7397 3009
e: