Overview of the cases

General

Background to the appellants’ cases

“Whilst there will not be an alternative to filing online, there are options available to customers so that they can fulfil their obligations.  For example, you could ask family or friends who have a computer to offer you Internet access or employ the services of an agent who could file the return on your behalf, although this may incur a modest fee.

Please note that filing online is straightforward and similar to filing on paper……

“This notice is to advise you that, for VAT periods starting on or after 1Aapril 2010, you must file VAT returns online and pay any VAT due on the returns electronically……

If you do not agree that you must file online/pay electronically, because:

·        You think our calculation of your turnover is wrong, or

·        You fall into one of the (very limited) categories of VAT customers who, by law, are not obliged to file online

you can ask for our decision to be reviewed by an HMRC officer……”

The law at issue in the appeal

s 132 power to provide for use of electronic communications

(1) Regulations may be made, in accordance with this section, for facilitating the use of electronic communications for –

(a) the delivery of information the delivery of which is authorised or required by or under any legislation relating to a taxation matter;

(b) the making of payments under any such legislation.

(2)  The power to make regulations under this section is conferred –

(a) ….

(b) on the Commissioners of Customs and Excise in relation to matters which are under their care and management.

(3) For the purposes of this section provision for facilitating the use of electronic communications includes any of the following –

(a) provision authorising persons to use electronic communications for the delivery of information to tax authorities, or for the making of payments to tax authorities;

(b) provision requiring electronic communications to be used for the making to tax authorities of payments due from persons using such communications for the delivery of information to those authorities;

….

(g) provision imposing conditions that must be complied with in connection with any use of electronic communications for the delivery of information or the making of any payment;

(h) provision, in relation to cases where use is made of electronic communications, for treating information as not having been delivered, or a payment as not having been made, unless conditions imposed by any such regulations are satisfied;

…

 (10)  In this section –

“electronic communications” includes any communications by means of an electronic communications service

…..” (my emphasis)

 “electronic communications service” means a service consisting in, or having as its principal feature, the conveyance by means of an electronic communications network of signals, except in so far as it is a content service.

s 135 Mandatory e-filing

(1) The Commissioners for Her Majesty’s Revenue and Customs (“the Commissioners”) may make regulations requiring the use of electronic communications for the delivery by specified persons of specified information required or authorised to be delivered by or under legislation relating to a taxation matter.

(2) Regulations under this section may make provision -

(a) as to the electronic form to be taken by information delivered to the Revenue and Customs using electronic communications;

….

(e) for treating information as not having been delivered unless conditions imposed by any of the regulations are satisfied;

…..

(4)  Regulations under this section may –

(a) allow any authorisation or requirement for which the regulations may provide to be given or imposed by means of a specific or general direction given by the Commissioners;

….

(7) The power to make provision by regulations under this section includes power –

…

(c)  to make different provision for different cases.

(8) References in this section to the delivery of information include references to any of the following (however referred to) –

(a)  the production … to a person of any information, account, record or document

….

(d)    the making of any return, claim, election or application.

.....”

25A

(1) Where a person makes a return required by regulation 25 using electronic communications, such a method of making a return shall be referred to in this Part as an ‘electronic return system’.

(2) Where a person makes a return on the form numbered 4 in Schedue 1 to these Regulations (“Form 4”) or, in the case of a final return, on the form numbered 5 in Schedule 1 to these Regulations (“Form 5”), such a method of making a return shall be referred to in thi Part as a ‘paper return system’.

(3)  A specified person must make a specified return using an electronic return system.

(4) In any case where an electronic return system is not used, a return must be made using a paper return system.

(5)    In this regulation a ‘specified person’ means a person who –

(a)  is registered for VAT with an effective date of registration on or after 1 April 2010 whether or not such a person is registered in substitution for another person under regulation 6 (transfer of a going concern), or

(b) is registered for VAT with an effective date of registration on or before 31 March 2010 and has as at 31 December 2009 or any date thereafter an annual VAT exclusive turnover of £100,000 or more whether or not that person’s turnover falls below this level,

provided that, in each case, that person has been notified as required by paragraph (7) below.

(6)   However 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 Act is applied at the time when he would otherwise be notified under paragraph (7) below

is not a specified person for the purposes of this regulation.

(7)    Where the Commissioners consider that a person is a specified person, they shall notify that person of that fact in writing.

(8)    Where an electronic return system is used, it must take a form approved by the Commissioners in a specific or general direction.

(9)    ….

(10)  A direction under paragraph (8) above may in particular –

(a) modify or dispense with any requirement of Form 4 or Form 5 (as appropriate),

(b) specify circumstances in which the electronic return system may be used, or not used, by or on behalf of the person required to make the return.

For the purposes of sub-paragraph (b), the direction may specify different circumstances for different cases.

……..

(13) No return shall be treated as having been made using an electronic return system unless it is in the form required by paragraph (8) above.

The requirement in paragraph (8) above incorporates the matters mentioned in paragraph (10) above.

(15)       In relation to returns made for prescribed accounting periods which end on or after 31 March 2011, a specified person who fails to comply with paragraph (3) above is liable to a penalty.

(16)       But a specified person who has a reasonable excuse for so failing to comply is not liable to a penalty.

(17)       The table below sets out the penalties depending on the level of turnover.

……” (my emphasis)

(2)     any person required to make a return shall pay to the Controller such amount of VAT as is payable by him in respect of the period to which the return relates not later than the last day on which he is required to make that return.

(2A) Where a return is made or is required to be made in accordance with regulations 25 and 25A above using an electronic return system, the relevant payment to the controller required by paragraph (2) above shall be made solely by means of electronic communications that are acceptable to the Commissioners for this purpose.

(2B)  With effect form 1^st April 2010, where a person makes any payment to the Controller required by paragraph (2) above by cheque (whether or not in contravention of paragraph (2A) above) –

(a)  the payment shall be treated as made on the day when the cheque clears to the account of the Controller, and

(b)  that shall be the day when payment of any VAT shown as due on the return is to be treated as received by the Commissioners for the purposes of section 59 of the Act.

(a) Direct debit

(b)Credit or debit card payment with Billpay service (ie internet)

(c) BACS direct credit

(d)Internet banking transfer

(e) Telephone banking transfer

(f)  Faster payment service from bank or building society

(g) CHAPS payment

(h) Bank Giro payment

Jurisdiction

·       If within scope of the statutory appeal right

·       Raising public law in defence

·       EU or ECHR permits such arguments.

Jurisdiction under VATA

“Section 83(1) VATA

…an appeal shall lie to a tribunal 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).

…” (my emphasis)

Was there a ‘decision’?

“If you do not agree that you must file online/pay electronically…you can appeal to an independent tribunal…”

But whatever the letter said, it could not create a right to appeal where one does not exist.  HMRC cannot give this tribunal a jurisdiction it does not otherwise have simply by saying in a letter that there is a right of appeal.

Was the decision about regulations under the 2002 FA?

“where a return is …required to be made….using an electronic return system, the relevant payment ..shall be made solely by means of electronic communications….”

 “With effect form 1^st April 2010, where a person makes any payment to the Controller required by paragraph (2) above by cheque (whether or not in contravention of paragraph (2A) above) –

(a)  the payment shall be treated as made on the day when the cheque clears to the account of the Controller, and

(b)  that shall be the day when payment of any VAT shown as due on the return is to be treated as received by the Commissioners for the purposes of section 59 of the Act.”

The application of the regulations

(a)        The person is not a specified person;

(b)        The amount of the penalty is incorrect;

(c)        The person did file online;

(d)        Or the taxpayer has a reasonable excuse for not filing online.

However, this subsection is specifically limited to an appeal against the imposition of a penalty and I find has nothing to say about the Tribunal’s jurisdiction under Regulation 83(1)(zc) in general.

Can the Tribunal consider questions of public law?

“[68] I do not think it is a valid objection to this straightforward interpretation of s 83(1)(c) according to its natural meaning that it has the effect that sometimes the tribunal will have to apply public law concepts in order to determine cases before it.  It happens regularly elsewhere in the legal system that courts or tribunals with jurisdiction defined in statute by general words have jurisdiction to decide issues of public law which may be relevant to determination of questions falling within their statutorily defined jurisdiction.  No special language is required to achieve that effect….

[70] ...there is clear public benefit in construing s 83 by reference to its ordinary and natural meaning which strongly supports that construction.  It is desirable for the tribunal to hear all matters relevant to determination of a question under s 83 … because (a) it is a specialist tribunal which is particularly well positioned to make judgments about the fair treatment of taxpayers by HMRC and (b) it avoids the cost, delay and potential injustice and confusion associated with proliferation of proceedings and ensures that all issues relevant to determine the one think that HMRC and the taxpayer are interested in…are resolved on one occasion in one place. It seems plausible to suppose that Parliament would have had these public benefits in mind when legislating in the wide terms of s 83.”

The law of precedent

·       Made without consideration of a binding higher authority (‘per incurian’);

·       Inconsistent with a decision of equivalent authority which I prefer;

·       If the views expressed did not form part of the actual judgment of the court.  Such non-binding views are referred to as “obiter”. Nevertheless, I am bound to give such obiter views expressed by a higher authority considerable respect and would be likely to follow them unless I considered they did not properly reflect a decision of even higher authority or were inconsistent with one of equivalent authority which I preferred.

J H Corbitt (Numismatists) Ltd [1980] STC 231

“…It cannot be and is not disputed that the value added tax tribunal has no jurisdiction to review the requirements as to books and records which the commissioners have laid down (as the 1972 Act authorises them to do) in the various appendices to the Blue book.  Their task on an appeal is confined on this aspect to an enquiry whether the trader’s books and records in fact comply with the requirements of the Blue Book….

“the arguments for protecting public authorities against unmeritorious or dilatory challenges to their decisions have to be set against the arguments for preserving the ordinary rights of private citizens to defend themselves against unfounded claims…

It would in my opinion be a very strange use of language to describe the respondent’s behaviour in relation to this litigation as an abuse or misuse by him of the process of the court.  He did not select the procedure to be adopted.  He is merely seeking to defend proceedings brought against him by the appellants.  In so doing he is seeking only to exercise the ordinary right of any individual to defend an action against him on the ground that he is not liable for the whole sum claimed by the plaintiff.  Moreover he puts forward his defence as a matter of right, whereas in an application for judicial review, success would require an exercise of the court’s discretion in his favour.”

“the central question …[is whether]…the defendant to collection proceedings of this kind [is] entitled to raise a public law defence which puts in issue the legality of directions underlying the assessment…there is no true distinction to be made between this case and Winder…the taxpayer is entitled to advance his public law defence in the county court.”

Relevance of these cases to proceedings brought by appellants

“there can be no abuse of process by a party who seeks a remedy by the very process which statute requires him to pursue…”

“[31]  I will not decide either way, even if I could on this appeal, whether in principle the analogy of Pawlowski v Dunnington could be applied in defence to a claim for payment of tax under an assessment under s 591C.  However I agree with the special commissioner and, so far as he said anything about it with the judge, that the point is not open to be taken on this statutory appeal.”

“It has been argued on behalf of the Respondents that the Appellant’s conduct in November and December 1998 and, in particular, his expressed intention to remove the Pensioneer Trustee (without any intention of appointing a replacement) and his expressed intention to terminate the trust and to transfer the trust property to himself, were sufficient grounds to warrant the discontinuance of approval of the Scheme. That may well be so. It is not, however, a matter that I have jurisdiction to determine. I am satisfied that there exists no right to appeal the decision to withdraw approval under section 591B(1) ICTA. The Appellant has not sought to challenge the decision to withdraw approval by way of judicial review, which would have been the appropriate remedy for him to seek if he felt that the apparent exercise of the statutory discretion was unreasonable or otherwise ultra vires. In the circumstances, therefore, I must proceed on the assumption that the decision to withdraw approval was valid and effective from 2 December 1998.”

Foster v Chief Adjudication Officer [1993] AC 794.

“(page 762) …. It is common ground that the principle of O’Reilly v Mackman [1982] 3 All ER 1124 … has no application, since there can be no abuse of process by a party who seeks a remedy by the very process which statute requires him to pursue.  It was further rightly accepted by [counsel] before your Lordships that a decision giving effect to secondary legislation which is ultra vires is, indeed, in the ordinary meaning of the words ‘erroneous in point of law’….

Oxfam [2009] EWHC 2078

“[75]  It is clear that s 83 … does not confer any general supervisory jurisdiction on the tribunal, but it seems to be to be a non sequitur to say that the tribunal has no power to apply public law principles if they are relevant to an appeal against … a decision of HMRC which falls within the terms of one of the headings of jurisdiction set out in s 83”

“[54]  …. the issue in [the Oxfam case] and the issue here are quite different.  There, the tribunal was required to decide the amount of input tax which Oxfam could recover, a question which as Sales J said at [63], comes four-square within the ambit of s 83(1)(c) of VATA.  Here, the question is not the amount of a penalty, or even whether one is due as a matter of law – there is no dispute that s 98A was engaged, and that it imposed a liability for five monthly penalties of £100 each – but whether HMRC should be precluded from imposing the penalties prescribed by that section, or from collecting them if imposed.  That, in our judgment, is a quite separate question of administration, one which, in accordance with the authorities to which we have already referred, is capable of determination only by way of judicial review and therefore not by the First-tier Tribunal.”

“[52] What was in issue in both of those cases [Winder and a similar case] was not whether the councils’ actions were fair or reasonable, or indeed an general principle of the common law, but whether the actions they had taken had the effect for which they argued – that is, whether the rent had been validly increased, and whether the compulsory purchase order had been vitiated by a subsequent change of mind.  Those questions may well have given rise to issues of public law, but they did not give rise to matters for which the only possible remedy is by way of judicial review; and they went, in each case, to the core of the individual’s defence of the claims made against him.”

“[31] It does not follow from the analysis above that the F-tT can never take account of or give effect to matters of public law, and in particular legitimate expectation….It would, however, be open to the F-tT to consider public law issues only if it was necessary to do so in the context of deciding issues clearly falling within its jurisdiction.  The central question in the present case is whether it was open to the Tribunal to consider Mr Noor’s case based on his legitimate expectation in decision an issue within its jurisdiction.  The answer to that question turns on the extent of the jurisdiction which is conferred by section 83(1)(c) VATA 1994, which comes down to a point of statutory construction.”

 “[87] In our view, the F-tT does not have jurisdiction to give effect to any legitimate expectation which Mr Noor may be able to establish in relation to any credit for input tax.  We are of the view that Mr Mantle is correct in his submission that the right of appeal given by section 83(1)(c) is an appeal in respect of a  person’s right to credit for input tax under the VAT legislation….That does not mean that under section 83(1)(c) the F-tT cannot examine the exercise of a discretion, given to HMRC under primary or subordinate legislation relation to the entitlement to input tax credit, and adjudicate on whether the discretion has been exercised reasonably….That is to be contrasted with the case of an ultra vires contract or a claim based on legitimate expectation where HMRC are acting altogether outside their powers.”

“[92] For our part, we consider that the ordinary meaning of the language used in the context of VATA 1994 as a whole is that it is concerned with the right to a credit arising under the terms of the VAT legislation (including, on one view, HMRC’s care and management powers)……

“[47] The commissioners reposte by arguing that this complaint of unfair treatment is essentially one about their conduct.  It is not a point involving the facts of Lombard’s individual case or the law applicable to those facts.  The proper remedy for unfair treatment is judicial review, not an appeal to the tribunal.  The tribunal is not a body entrusted with a supervisory, public law, jurisdiction.  Here there is a question of discretion involved.

[48]  I think that the commissioners are right.  The actual decision impugned is that to invoke unjust enrichment in the case of Lombard.  It is not a decision to invoke unjust enrichment in the case of Lombard but not others.  That is what happened in fact but there never was a decision to that effect.”

United Biscuits [1992] STC 325

Arnold  [1996] STC 1271

·       The secondary or tertiary legislation was unlawful as ultra vires the primary legislation under which it was made or for some other reason;

·       That a government body (in this case HMRC) has unlawfully failed to apply tertiary legislation or an extra statutory concession (“ESC”);

·       (in so far as not within above heading) that HMRC has acted in breach of a person’s legitimate expectations;

·       A government body (in this case HMRC) has unlawfully exercised a discretion;

·       That a government body (in this case HMRC) has unlawfully failed to exercise a discretion;

Allegation that secondary legislation unlawful

Alleged failure to apply tertiary legislation or ESC

Legitimate expectations

Liability depends on a prior exercise of discretion by HMRC

So applying Winder,  normal statutory interpretation of s 83 means that, where this tribunal has jurisdiction to consider an assessment, it can consider whether a prior exercise of a discretion by HMRC, on which the validity of the assessment depends, was lawful in the public law sense. 

However, so far as this case is concerned the issue of the decision to the appellants that they must file online did not depend on a prior exercise of discretion by HMRC.  It was merely an application of the regulations: ie an application of secondary legislation.

Nevertheless, the justiciability of whether HMRC’s exercise of a discretion was lawful was relevant to this case as the joint appellants’ criticised HMRC’s reliance on the telephone filing concession.  I consider the legality of this concession and therefore whether HMRC could rely on it below:  §§477-516.

HMRC have refused to exercise discretion to exempt taxpayer

Decision on jurisdiction in the  joint appellants’ case

Did the regulations include a discretion?

(a)         not to breach the appellants’ Convention rights (discussed below);

(b)        To give effect to the undertaking in the RIA (§247)

25A

(1) Where a person makes a return required by regulation 25 using electronic communications, such a method of making a return shall be referred to in this Part as an ‘electronic return system’.

(2) Where a person makes a return on the form numbered 4 in Schedule 1 to these Regulations (“Form 4”) or, in the case of a final return, on the form numbered 5 in Schedule 1 to these Regulations (“Form 5”), such a method of making a return shall be referred to in this Part as a ‘paper return system’.

…..

(8)    Where an electronic return system is used, it must take a form approved by the Commissioners in a specific or general direction.

(9)    ….

(10)  A direction under paragraph (8) above may in particular –

(a) modify or dispense with any requirement of Form 4 or Form 5 (as appropriate),

(b) specify circumstances in which the electronic return system may be used, or not used, by or on behalf of the person required to make the return.

For the purposes of sub-paragraph (b), the direction may specify different circumstances for different cases.

……..

(13) No return shall be treated as having been made using an electronic return system unless it is in the form required by paragraph (8) above.

The requirement in paragraph (8) above incorporates the matters mentioned in paragraph (10) above.

……”

“These are the conditions for submitting returns electronically.  The wording in bold is a direction for this purpose having the force of law.

….

If you have appealed against a mandation notice issued under regulation 25A(7) or have requested a formal review, you are not required to submit VAT returns electronically while the issue is being determined.

NOTES

The legal basis for these conditions is in the Value Added Tax Regulations 1995 (SI 1995/2518).”

Decision on fourth appellant’s public law case

(a)   That the 1999 and 2002 Finance Acts do not permit secondary legislation requiring payment to be by electronic means;

(b)  Regulation 40(2A) was unlawful under the Convention.

Jurisdiction to consider the Convention?

Interpretation of the law

“3 Interpretation of legislation.

(1)So far as it is possible to do so, primary legislation and subordinate legislation must be read and given effect in a way which is compatible with the Convention rights.

(2)This section—

(a)applies to primary legislation and subordinate legislation whenever enacted;

(b)does not affect the validity, continuing operation or enforcement of any incompatible primary legislation; and

(c)does not affect the validity, continuing operation or enforcement of any incompatible subordinate legislation if (disregarding any possibility of revocation) primary legislation prevents removal of the incompatibility.

4 Declaration of incompatibility.

(1)Subsection (2) applies in any proceedings in which a court determines whether a provision of primary legislation is compatible with a Convention right.

(2)If the court is satisfied that the provision is incompatible with a Convention right, it may make a declaration of that incompatibility.

(3)Subsection (4) applies in any proceedings in which a court determines whether a provision of subordinate legislation, made in the exercise of a power conferred by primary legislation, is compatible with a Convention right.

(4)If the court is satisfied—

(a)that the provision is incompatible with a Convention right, and

(b)that (disregarding any possibility of revocation) the primary legislation concerned prevents removal of the incompatibility,

it may make a declaration of that incompatibility.

(5)In this section “court” means—

(a)the Supreme Court;

(b)the Judicial Committee of the Privy Council;

(c)the Court Martial Appeal Court;

(d)in Scotland, the High Court of Justiciary sitting otherwise than as a trial court or the Court of Session;

(e)in England and Wales or Northern Ireland, the High Court or the Court of Appeal.

(f)the Court of Protection, in any matter being dealt with by the President of the Family Division, the Vice-Chancellor or a puisne judge of the High Court.

(6)A declaration under this section (“a declaration of incompatibility”)—

(a)does not affect the validity, continuing operation or enforcement of the provision in respect of which it is given; and

(b)is not binding on the parties to the proceedings in which it is made.

6 Acts of public authorities.

(1)It is unlawful for a public authority to act in a way which is incompatible with a Convention right.

(2)Subsection (1) does not apply to an act if—

(a) as the result of one or more provisions of primary legislation, the authority could not have acted differently; or

(b) in the case of one or more provisions of, or made under, primary legislation which cannot be read or given effect in a way which is compatible with the Convention rights, the authority was acting so as to give effect to or enforce those provisions.

(3)In this section “public authority” includes—

(a)a court or tribunal, and

(b)any person certain of whose functions are functions of a public nature,

but does not include either House of Parliament or a person exercising functions in connection with proceedings in Parliament.

(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5)In relation to a particular act, a person is not a public authority by virtue only of subsection (3)(b) if the nature of the act is private.

(6)“An act” includes a failure to act but does not include a failure to—

(a)introduce in, or lay before, Parliament a proposal for legislation; or

(b)make any primary legislation or remedial order.

(a)        that secondary legislation must not be incompatible with the Convention because the terms of the primary legislation compel it to be so; and

(b)        that first this tribunal must in so far as possible and as provided by the HRA construe the secondary legislation to be compatible with the Convention.

7 Proceedings.

(1)A person who claims that a public authority has acted (or proposes to act) in a way which is made unlawful by section 6(1) may—

(a)bring proceedings against the authority under this Act in the appropriate court or tribunal, or

(b)rely on the Convention right or rights concerned in any legal proceedings,

but only if he is (or would be) a victim of the unlawful act.

(2)…[not relevant]….

(4)…[not relevant]…

(5)Proceedings under subsection (1)(a) must be brought before the end of—

(a)the period of one year beginning with the date on which the act complained of took place; or

(b)such longer period as the court or tribunal considers equitable having regard to all the circumstances,

but that is subject to any rule imposing a stricter time limit in relation to the procedure in question.

(6)In subsection (1)(b) “legal proceedings” includes—

(a)proceedings brought by or at the instigation of a public authority; and

(b)an appeal against the decision of a court or tribunal.

(7)For the purposes of this section, a person is a victim of an unlawful act only if he would be a victim for the purposes of Article 34 of the Convention if proceedings were brought in the European Court of Human Rights in respect of that act.

(8)Nothing in this Act creates a criminal offence.

(9)….[not relevant]….

(10)In making rules, regard must be had to section 9.

(11)The Minister who has power to make rules in relation to a particular tribunal may, to the extent he considers it necessary to ensure that the tribunal can provide an appropriate remedy in relation to an act (or proposed act) of a public authority which is (or would be) unlawful as a result of section 6(1), by order add to—

(a)the relief or remedies which the tribunal may grant; or

(b)the grounds on which it may grant any of them.

(12)An order made under subsection (11) may contain such incidental, supplemental, consequential or transitional provision as the Minister making it considers appropriate.

(13)“The Minister” includes the Northern Ireland department concerned.

8 Judicial remedies.

(1)In relation to any act (or proposed act) of a public authority which the court finds is (or would be) unlawful, it may grant such relief or remedy, or make such order, within its powers as it considers just and appropriate.

(2)But damages may be awarded only by a court which has power to award damages, or to order the payment of compensation, in civil proceedings.

(3)No award of damages is to be made unless, taking account of all the circumstances of the case, including—

(a)any other relief or remedy granted, or order made, in relation to the act in question (by that or any other court), and

(b)the consequences of any decision (of that or any other court) in respect of that act,

the court is satisfied that the award is necessary to afford just satisfaction to the person in whose favour it is made.

(4)In determining—

(a)whether to award damages, or

(b)the amount of an award,

the court must take into account the principles applied by the European Court of Human Rights in relation to the award of compensation under Article 41 of the Convention.

(5)A public authority against which damages are awarded is to be treated—

(a)in Scotland, for the purposes of section 3 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1940 as if the award were made in an action of damages in which the authority has been found liable in respect of loss or damage to the person to whom the award is made;

(b)for the purposes of the Civil Liability (Contribution) Act 1978 as liable in respect of damage suffered by the person to whom the award is made.

(6)In this section—

“court” includes a tribunal;

“damages” means damages for an unlawful act of a public authority; and

“unlawful” means unlawful under section 6(1).

Jurisdiction and the obligation to pay electronically

“In the determination of his civil rights and obligations or of any criminal charges against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law.”

“Article 47 Right to an effective remedy and to a fair trial

Everyone … has the right to an effective remedy before a tribunal….

Everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal ….”

6 Acts of public authorities.

(1)It is unlawful for a [tribunal] to act in a way which is incompatible with a Convention right.

“3 Interpretation of legislation.

(1)So far as it is possible to do so, primary legislation and subordinate legislation must be read and given effect in a way which is compatible with the Convention rights.

(2)This section—

(a)applies to primary legislation and subordinate legislation whenever enacted;

(b)does not affect the validity, continuing operation or enforcement of any incompatible primary legislation; and

(c)does not affect the validity, continuing operation or enforcement of any incompatible subordinate legislation if (disregarding any possibility of revocation) primary legislation prevents removal of the incompatibility.

 Jurisdiction sufficient to hear complaint?

Conclusion

Jurisdiction on EU law matters

The facts

The evidence

The history behind the regulations

Lord Carter’s report

“… to look at ways of increasing take-up of online services for income tax self assessment, VAT, corporation tax and PAYE, and maximising benefits for customers whilst ensuring that the department continues to deliver a sustainable and efficient service that supports compliance”

Executive summary

…Online services…can help customers to fulfil their tax obligations accurately, more quickly and provide them with greater certainty.  For Government, customer use of online services will provide opportunities to free up resources from low value tasks, such as processing and error correction, to focus on more complex activities such as compliance and customer support….

Widescale adoption of online services is an essential element in realising the efficiencies that technology can offer….

5.3  Increased use of HMRC online services will enable savings to be made on high volume, low value tasks such as data entry and error correction.  Basic processing alone of an individual’s paper SA return costs over £8 more than the equivalent online return.  Use of software and online services will promote cleaner data and underpin wider savings both for HMRC and for businesses.

5.4 ….We recommend that government should set an aspirational goal for HMRC that it should aim for universal electronic delivery of business tax returns by 2012.  HMRC should also aim for universal electronic delivery of individuals’ tax returns from IT literate groups by the same date.

5.5 There will be a variety of ways of achieving that goal, but we think that as a principle HMRC should only require use of an online service where the particular service meets the needs of the main users and it has been tested to show that it can meet demand, and provide a good customer experience, at the peak times.  Equally, compulsory requirements for filing online should take account of the IT abilities of the main users.

…

5.8  A relatively small number of businesses have no need for IT and do not use an agent.  Equally some individuals who complete their own returns may not have IT skills or equipment. Taking account of this, our view is that the Government’s medium-term approach should be to require online filing by agents and by businesses, with an exception for the smallest businesses.  That exception should be reviewed in the run up to 2012, taking account of internet penetration and IT skills among the UK SME population at that time…

5.19 …

·        All traders with an annual turnover in excess of £100,000 should be required to file their VAT returns online, and make payments electronically, for accounting periods starting after 31 March 2010. 

Paper filing will remain an option for traders with turnover below £100,000 but the Government should review the need for this exception in the run up to 2012.”

 “HMRC have assured us that they take security and taxpayer confidentiality very seriously, and all their online filing services for tax incorporate industry best practices to ensure that transaction online with these systems is both safe and secure”

 “HMRC did want to check that no-one would be adversely affected by the proposals, so undertook an Equality Impact Assessment (EQIA) which it published in July 2008, entering into public consultation for three months.  The assessment concluded that, in the vast majority of cases, there was no diversity impact. However, HMRC have been in regular discussion with the voluntary sector organisations ‘Tax Aid’ and ‘Tax Help for Older People’ and the representative organisation LITRG (Low Income Tax Reform Group) to decide how best to achieve support for our most vulnerable customers, with particular focus on the elderly and those who are unfamiliar with computers.”

“We have identified no negative impacts in terms of age, gender, race (except language), sexual orientation, marital status, political opinion or those with dependants from the proposals for compulsory online filing of company tax, VAT and PAYE returns and forms.

However, our early consultation and later research have identified some possible issues and impacts with regards to language, religion and disability.  This EQIA sets out these impacts, along with the arrangements that have been applied (or are planned) to mitigate them, where appropriate.”

“An …EQIA…has indicated that the main diversity issues surrounding this package of measures have been addressed by not making online filing of SA returns mandatory for any individuals…A small number of very small employers may choose to use an agent to file where they have not before.  Special rules will be in place for businesses run entirely by individuals that have a religious conscience objection to using IT.  The regulations will also be drafted to include a direction-making power which will enable us to exempt specific customer groups.  This will be used should we find that there are some customers who, despite the measures we are taking to support those filing online, are still unable to use the service or face significant difficulties in doing so.”

Consultation documents on tranche 2

“However, concerns were expressed (to differing degrees) by virtually all respondents about the potential for difficulty which might be experienced by one or more of the following:

·        Those living in rural areas, with little or no reliable access to the internet (or where the internet was available only at very slow speeds)

·        People who were not IT literate, and were reluctant or unable to learn

·        People with disabilities, which might make it very difficult or impossible for them to file online

·        Those on low turnovers/profit margins, who might be unable to afford to buy computers, the software and access to the internet

·        Elderly customers, who might – as a group – be more likely to be unfamiliar with computers/the internet, and who might additionally experience one or more of the other issues above.

These were all groups which had previously been identified as potentially vulnerable by HMRC, and which had also participated in the Tranche 1 mandation.  No new groups of people were identified.

“Government remains of the view that mandation should go ahead, as planned, in April 2012; and that the draft regulations putting mandation into effect will not create further exemptions from online filing, since Government policy remains to encourage businesses to go online wherever possible, providing customers with the necessary support (ie assistance into digital) to do so.”

The questions to which I need answers.

(a) Why don’t the appellants use a computer?

(b)how much money does online filing save HMRC?

(c) How much money does a computer cost?

(d)How much money does using a profession agent cost?

(e) Is a disabled person less likely to use a computer?

(f)  Is an older person less likely to be able to use a computer?

(g) Is an older person less likely to own a computer?

(h) Is it harder for an older person to learn to use a computer?

(i)  How long would it take to learn to use a computer to file online?

(j)  What is a bank giro payment?

(k) How safe is it to use the internet or make online payments?

Below I summarise what the witnesses said and then attempt to answer these questions based on the evidence I was given.

Mr Tay

Mr Bishop

Mr Sheldon

Mr Williamson

‘some have made an informed choice not to engage directly in using the internet, and no part of this action plan suggests that they should be compelled to engage without a reason or need.”

“every single government service must be available to everyone- no matter if they are online or not”. 

Mr Hallam

“The internet is vital for the UK’s economic prosperity, national security and for our way of life.  It brings many opportunities for businesses and people, but also threats from crime, espionage, terrorism and warfare which must be addressed.

…

Cyber attacks threaten our economy and our national security.  This threat is real and increasingly important.

However, it is very difficult to give an accurate figure to the cost of cyber crime to the UK economy.  What we do know is that the costs are high, and they are increasing.

To take the latest Action Fraud figures, over the past 12 months the centre has taken over 46,000 reports from the public of cyber enabled crime.  This amounted to attempted levels of fraud of £292million.  And we know that is only a fraction of all crimes committed.

The most serious threats are real and present and highly organised….”

Security information for agents

Why online security is important to HMRC, tax agents and their clients.

[introduction]

…If your confidential login details fall into the wrong hands, fraudsters may have the ability to generate false repayments and direct them to third parties without the knowledge of HMRC, the tax agent or their client.

…

Unauthorised use of your login details can lead to financial losses fro tax agents, their clients, HMRC, as well as affecting the client/agent relationship.  There is also the potential to undermine your clients’ confidence in the ability to communicate or transact business with HMRC or their agent by email or online.

….

Online security for agents

Each year, a very small number of tax agents’ credentials are compromised, potentially leading to fraudulent activity and significant financial loss to the Exchequer….

“HMRC will never send notifications of a tax rebate by email, or ask you to disclose personal or payment information by email….”

Emails are, of course, not the same as online filing systems as the latter have built-in security such as encryption.  But nevertheless it is clear that even HMRC, outside this hearing,  recognise that there are risks inherent with electronic communications.

Linda Allen

(a)   To provide a better and cost effective service for taxpayers;

(b)  Encourage taxpayers to use new technology

(c)   Capture clean easily processed data to reduce HMRC and taxpayer costs.

 Judith Pattison

(1)  They should ask friends and family to loan their computer or ask them or a professional person to file on their behalf; or

(2)  They should use the free computer facilities in public libraries.

(1)  Attending a HMRC enquiry centre where the taxpayer could be assisted by a HMRC officer in using a standalone PC provided for the purpose of registering for online filing and actually filing VAT returns.

(2)  Opting for telephone filing.

“Help available to you if you feel you will have real difficulty in going online (for example, because you live in an area without reliable internet access, or have a disability which makes it very difficult or impossible for you to use a computer).  If you are in this position, you should call [telephone number given] (open 8am to 6pm, Mondays to Fridays, except bank holidays) and explain your circumstances.  The helpline staff will explain what support options HMRC can provide.”

Mr Michael Cameron

Relying on the evidence given I make the following findings in answer to the questions posed at § 254:

Why don’t the appellants use a computer?

How much money does online filing save HMRC?

How much money does a computer cost?

How much money does using a profession agent cost?

Is a disabled person less likely to use a computer?

Is an older person less likely to be able to use a computer?

(a)   They do not consider business people and therefore it is not possible to draw the conclusion that old persons in business are less likely to use internet than young persons in business;

(b)  It looks at use of the internet rather than computer illiteracy.  The fact a person does not use the internet does not mean they can’t use the internet. 

(c)   Mr Sheldon is the oldest of the four appellants but is computer literate, and Mr Tay is not old (as he is only 61) yet he is computer illiterate and so (implies Mr Macnab) the conclusion of the report is suspect. 

Is an older person less likely to own a computer?

Is it harder for an older person to learn to use a computer?

(page 108)The overwhelming conclusion that emerges from this body of research is that older adults experience significantly more difficulty learning to use a computer than do younger adults, with ten out of the twelve studies finding that older adults have more trouble than do younger adults. ‘Difficulty’ is defined here as taking a longer time to learn to use the system, making more errors on a performance evaluation after training is completed, and requiring more help while learning to use the system.

…

(page 118) The research summarised in this paper has suggested that older adults experience greater difficulty than younger adults when learning to use a computer.  This difficulty is probably not due to increased computer anxiety on the part of older adult users, nor is it likely due to negative attitudes towards computers.  Some research has suggested that reductions in cognitive abilities (especially spatial ability) may play a role in older adults’ difficulty with computers

How long would it take to learn to use a computer in order to file online?

What are Bank Giro payments?

How safe is it to use the internet  or  make online payments?

Telephone filing

What is the telephone filing service?

How does telephone filing work?

How inconvenient is it to use HMRC’s telephone filing service?

Is telephone filing an exemption from the obligation to file online or merely a form of assistance with online filing?

Return must be to controller

What is an agent?

“the essence of the agent’s position is that he is only an intermediary between two other parties, and it is therefore essential to an agency in this sense that a third party should be in existence or contemplated.”

Public law and the telephone filing concession

Timing

Are concessions justiciable in this Tribunal?

“Mere administrative practices, which by their nature were alterable at will by the authorities, could not be regarded as constituting proper fulfilment of a member state’s obligations under the Treaty, since they maintained a state of uncertainty as regards the extent of the rights of the persons concerned as guaranteed by the Treaty.”

Is it lawful as a matter of public law  and does it matter?

·       It may ignore s 25(4) Value Added Tax Regulations 1994;

·       It is an unpublished and largely secret concession;

·       It may be “Wednesbury unreasonable” in that HMRC do not appear to have considered all relevant matters

“(4) In any case where an electronic return system is not used, a return must be made using a paper return system.”

Public law and the enquiry office concession

Are the regulations a breach of the appellants’ human rights?

(a) The taxpayer could use his own computer and internet link.  For taxpayers without an online computer this would involve capital expenditure on the purchase of hardware and software and income expenditure on a monthly contract for broadband or dial-up link to the internet;

(b)The taxpayer could use an online computer belonging to a friend or family member assuming that friend or family member gave permission.  This would not be expected to involve expenditure on the part of the taxpayer.

(c) The taxpayer could use a public computer free of charge at a public library.

(d)The taxpayer could engage a professional agent to make the online submission on behalf of the taxpayer.

(e) At the request of the taxpayer, a friend or family member could make the online return submission on behalf of the taxpayer.

(f)  The taxpayer could use HMRC’s “phone filing” facility.  I mention this option but I have already determined that HMRC cannot rely on it in these proceedings, so it is irrelevant as an option.

(g) The taxpayer could use free of charge a dedicated stand-alone computer at an HMRC enquiry centre but I have already determined that HMRC cannot rely on this option in these proceedings, so it is irrelevant as an option.

Convention and fairness

Do companies have human rights?

“As to the merits of the pleas, the Court would make at the outset the general observation that Pine Valley and Healy Holdings were no more than vehicles through which Mr Healy proposed to implement the development for which outline planning permission had been granted.  On this ground alone it would be artificial to draw distinctions between the three appellants as regards their entitlement to claim to be ‘victims’ of a violation.”

The right to peaceful possession of property

“First article of the first protocol (“A1P1”)

Every natural or legal person is entitled to the peaceful enjoyment of his possessions.  No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”

(a) Use own computer and internet link.  For taxpayers without an online computer this would involve capital expenditure on the purchase of hardware and software and income expenditure on a monthly contract for broadband or dial-up link to the internet;

and

(d)Engaging a professional agent to make the online submission on behalf of the taxpayer.

And I consider A1P1 in the context of these two types of expenditure.  So far as (a) is concerned I consider this on the assumption that the appellant does not have a computer. To state the obvious, if the appellant already has an internet linked computer, then this method of compliance could not involve a breach of A1P1.  (Mr Sheldon’s evidence was that he has a computer and this is also the tenor of Brinklow’s submissions.  Mr Tay and Mr Bishop do not have computers.)

“[42]…an interference, including one resulting from a measure to secure payment of taxes, must strike a ‘fair balance’ between the demands of the general interest of the community and the requirements of the protection of the individual’s fundamental rights…there must be a reasonable relationship of proportionality between the means employed and the aims pursued….”

(a) Do the appellants have a possession within the meaning of A1P1?

(b)If they do, do the regulations (which HMRC’s decisions the subject to this appeal give effect to) interfere with it?

(c) Is the interference lawful because (in accordance with the second paragraph of A1P1) it is to secure the payment of taxes?

(d)Is the interference lawful because (in accordance with the second paragraph of A1P1) it is in the public interest?

(e) Is the interference in the public interest but nevertheless unlawful because it is not within the State’s margin of appreciation?

Is there a possession?

Is there interference by the regulations with the appellants’ possessions?

Does the interference secure the payment of taxes? 

“The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”

There was a dispute about what “secure the payment of taxes” meant in the context of the Convention. 

“[49]…In matters of general social and economic policy, on which opinions within a democratic society may reasonably differ widely, the domestic policy-maker should be afforded a particularly broad margin of appreciation….

[50]  In so far as the tax sphere is concerned, the Court’s well-established position is that States may be afforded some degree of additional deference and latitude in the exercise of their fiscal functions under the lawfulness test….

Margin of appreciation/proportionality

“the Court will respect the legislature’s assessment in such matters unless it is devoid of reasonable foundation”

“[59]  ‘sense of social justice of the population’ in combination with the interest to protect the public purse and to distribute the public burden satisfies the Convention requirement of a legitimate aim….no convincing evidence on which to conclude that the reasons referred to by the Government were manifestly devoid of any reasonable basis….”

“[69] … For the purposes of the latter provision, the Court must determine whether a fair balance was struck between the demands of the general interest of the community and the requirements of the protection of the individual’s fundamental rights.  …”

“an individual and excessive burden”.

“[60] In particular, there must be a reasonable relationship of proportionality between the means employed and the aim sought to be realised by the impugned measure….

[61]…the State enjoys a wide margin of appreciation with regard both to choosing the means of enforcement and to ascertaining whether the consequences of enforcement are justified in the general interest….

[66] ..such measures must be implemented in a non-discriminatory manner and comply with the requirements of proportionality…

“…the measure complained of entailed an excessive and individual burden on the applicant’s side.  This is all the more evident when considering the fact that the measure targeted only a certain group of individuals, who were apparently singled out by the public administration in its capacity as employer……[75] Therefore the measure cannot be held reasonably proportionate to the aim sought to be realised.”

(a) The benefit of the measure to the state bears a “reasonable relationship of proportionality” to the costs of it to the affected persons;

(b)whether the measure unfairly singles out a few people. This is the question of whether it imposes an individual burden But proportionality also looks at the degree of hardship. This is the question of whether it imposes an excessive burden?

Conclusion

The right to respect for private and family life and correspondence

“1.  Everyone has the right to respect for his private and family life, his home and his correspondence.

2. There shall be no interference by a public authority with the exercise of this right except as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well-being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others.”

(b)The taxpayer could use an online computer belonging to a friend or family member assuming that friend or family member gave permission.  This would not be expected to involve expenditure on the part of the taxpayer;

(d)The taxpayer could engage a professional agent to make the online submission on behalf of the taxpayer.

(e) At the request of the taxpayer, a friend or family member could make the online return submission on behalf of the taxpayer.

 “[private life] can therefore embrace multiple aspects of the person’s physical and social identity…Beyond a person’s name, his or her private life may include other means of personal identification and of linking to a family….[67] The mere storing of data relating to the private life of an individual amounts to an interference within the meaning of Art 8…The subsequent use of the stored information has no bearing on that finding...However, in determining whether the personal information retained by the authorities involves any of the private-life aspects mentioned above, the Court will have due regard to the specific context in which the information at issue has been recorded and retained…..” 

“…the engagement of article 8 depended upon an affirmative answer to two questions, namely whether there had been or would be an interference by a public authority with the exercise of a person’s right to respect for his private or family life and, if so, whether it had had, or would have, consequences of such gravity as potentially to engage the operation of the article….”

I note in passing, as the point was not argued, that in so far as the appellants cannot use a computer so in order to use one in a public library they would be required to learn to use one, then being required to learn to use a computer in order to file a simple tax return might be an interference with private life.  I don’t need to decide this on the facts of this case as the only person it is relevant to is Mr Tay and the matter falls under A1P1 anyway as explained in §759.

“to those features which are integral to a person’s identity or ability to function socially as a person.”

“the private sphere within which individuals expect to be left alone to conduct their personal affairs and live their personal lives as they chose”. 

Sufficient gravity?

The position on (d) is different.  This is an interference with correspondence but is it of sufficient gravity to engage A8?  I am not satisfied that the interference to the right to respect for correspondence  is of sufficient gravity where all that is required is that a person instruct a professional agent to file their “correspondence” online, if that agent belongs to a professional body with a code of ethics and a duty of confidentiality.

Justification

Discrimination - Article 14 Convention

“The enjoyment of the rights and freedoms set forth in this Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, natural or social origin, association with a national minority, property, birth or other status.”

… within the ambit of the rights and freedoms guaranteed, discriminatory treatment having as its basis or reason a personal characteristic (status) by which persons or groups of persons are distinguishable from each other.

(a) Do the appellants have a characteristic protected by A14?

(b)Have the appellants been discriminated against because of this protected characteristic?

(c) Was the discrimination is within the ambit of a convention right (in other words, did the discrimination occur during the exercise of a right protected by the Convention?)

(d)Is the discrimination nevertheless justified?

Protected characteristics and “other status”

sex, race, colour, language, religion, political or other opinion, natural or social origin, association with a national minority, property, birth or other status

Protected characteristic – age

Protected characteristic – computer illiteracy?

[46]  In the present case, the treatment of which the applicant complains does not fall within one of the specific grounds listed in Article 14. In order for the applicant’s complaint to be successful, he must therefore demonstrate that he enjoyed some “other status” for the purpose of Article 14. In this regard, the Court recalls that the words “other status” (and a fortiori the French “toute autre situation”) have generally been given a wide meaning (see Carson, cited above, § 70, and Clift v. the United Kingdom, no. 7205/07, § 63, 13 July 2010). Although the Court has consistently referred to the need for a distinction based on a “personal” characteristic in order to engage Article 14, it is clear that the protection conferred by that Article is not limited to different treatment based on characteristics which are personal in the sense that they are innate or inherent (see Clift v. the United Kingdom, cited above, § 59). On the contrary, the Court has found “other status” where the distinction was based on military rank (Engel and Others v. the Netherlands, 8 June 1976, Series A no. 22); the type of outline planning permission held by the applicant (Pine Valley Developments Ltd and Others v. Ireland, 29 November 1991, Series A no. 222); whether the applicant’s landlord was the State or a private owner (Larkos v. Cyprus [GC], no. 29515/95, Convention 1999-I; the kind of paternity the applicant enjoyed (Paulík v. Slovakia, no. 10699/05, Convention 2006-XI (extracts); the type of sentence imposed on a prisoner (Clift v. the United Kingdom, cited above); and the nationality or immigration status of the applicant’s son (Bah v. the United Kingdom, no. 56328/07, Convention 2011).

…..

Indirect discrimination

“…a general policy or measure that has disproportionately prejudicial effects on a particular group may be considered discriminatory notwithstanding that it is not specifically aimed at that group.”

“[44]  … The right not to be discriminated against in the enjoyment of the rights guaranteed under the Convention is also violated when States without an objective and reasonable justification fail to treat differently persons whose situations are significantly different.”

Discrimination?

“As applicants might have difficulty in proving discriminatory treatment, in order to guarantee those concerned the effective protection of their rights, less strict evidential rules would apply in cases of alleged indirect discrimination.  Thus where an applicant alleging indirect discrimination established a rebuttable presumption that the effect of a measure or practice was discriminatory, the burden then shifted to the respondent state, which had to show that the difference in treatment was not discriminatory.”

“[13] … I would reject the attempt on behalf of the Secretary of State to criticise the appellant’s case for not being founded on statistical evidence.  Whilst such evidence can be important in an art 14 case …it is not a prerequisite.  Where, as in the present case, a group recognised as being in need of protection against discrimination – the severely disabled – is significantly disadvantaged by the application of ostensibly neutral criteria, discrimination is established, subject to justification”

“[18] Whilst it is true that there has been a conspicuous lack of cases post- Thlimmenos in which a positive obligation to allocate resources has been established, I am not persuaded that this is a legal no-go area.  I accept that it is incumbent upon a court to approach such an issue with caution and to consider with case any explanation which is proffered by the public authority for the discrimination.  However, this arises more at the stage of justification than at the earlier stage of considering whether discrimination has been established….

Within ambit

“[32]…The Court’s case law shows that, although Article 14 has no independent existence, it may play an important autonomous role by complementing the other normative provisions of the Convention and the Protocols:  article 14 safeguards individuals, placed in similar situations, from any discrimination in the enjoyment of the rights and freedoms set forth in those other provisions.  A measure which, although in itself in conformity with the requirements of the Article of the Convention of the Protocols enshrining a given right or freedom, is of a discriminatory nature incompatible with Article 14, therefore  violates those two articles taken in conjunction.  It is as though Article 14 formed an integral part of each of the provisions laying down rights and freedoms.”

“[40] The court recalls that Art 14 has no independent existence, since it has effect solely in relation to the rights and freedoms safeguarded by the other substantive provisions of the Convention and its Protocols.  However, the application of Article 14 does not presuppose a breach of one or more of such provisions and to this extent it is autonomous.  For Art 14 to become applicable it suffices that the facts of a case fall within the ambit of another substantive provision of the Convention or its Protocols.”

“[63] …It is necessary but it is also sufficient for the facts of the case to fall “within the ambit” of one or more of the Convention Articles….

731.    The parties did not agree what “within the ambit” of the Convention actually meant.  HMRC’s position was that it meant “close to the core” of a convention right. 

“it is enough there should have been discrimination on a proscribed ground within the ambit of another article of the convention.” 

“[4] It is not difficult… to identify the core values which the provision [ie A1P1] is intended to protect.  But the further a situation is removed from one infringing those core values, the weaker the connection becomes, until a point is reached when there is no meaningful connection at all.  At the inner extremity a situation may properly be said to be within the ambit or scope of the right, nebulous those expressions necessarily are.  At the outer extremity, it may not… I cannot accept that even a tenuous link is enough….”

“[5] …I regard the application of a rule governing a non-resident’s parent’s liability to contribute to the costs incurred by the parent with care, even if it result in the non-resident parent paying more than she would under a different rule, as altogether remote from the sort of abuse at which A1P1 is directed.”

 [13] … The … boundary identified in the Strasbourg jurisprudence is that, for article 14 to be engaged, the impugned conduct must be within the 'ambit' of a substantive Convention right. This term does not greatly assist. In this context 'ambit' is a loose expression, which can itself be interpreted widely or narrowly. It is not a self-defining expression, it is not a legal term of art. Of itself it gives no guidance on how the 'ambit' of a Convention article is to be identified. The same is true of comparable expressions such as 'scope' and the need for the impugned measure to be 'linked' to the exercise of a guaranteed right.

[14]  The approach of the Convention is to apply these expressions flexibly. Although each of them is capable of extremely wide application, the Strasbourg jurisprudence lends no support to the suggestion that any link, however tenuous, will suffice. Rather, the approach to be distilled from the Strasbourg jurisprudence is that the more seriously and directly the discriminatory provision or conduct impinges upon the values underlying the particular substantive article, the more readily will it be regarded as within the ambit of that article; and vice versa. In other words, the Convention makes in each case what in English law is often called a 'value judgment'.

[17] ……..But, on this, there is an immediate difficulty confronting the claimant: the impugned regulations have no adverse impact on that family life. The adverse impact of which the claimant complains is the adverse impact the regulations have on her as a partner in her family relationship with her new partner. Her complaint is that she is treated differently, and is worse off financially, than she would be if she were living with a man.

…..

“The application of art 14 does not necessarily presuppose the violation of one of the substantive rights guaranteed by the convention.  It is necessary bit it is also sufficient for the facts of the case to fall ‘within the ambit’ of one or more of the convention articles (see among many other authorities Burden v UK …)  The Court has also explained that art 14 comes into play whenever ‘the subject matter of the disadvantage … constitutes one of the modalities of the exercise of a right guaranteed.’ (see National Union of Belgian Police v Belgium …) or the measure complained of is ‘linked to the exercise of a right guaranteed’ (see Schmidt v Sweden … )”

Discrimination?

Justification

“[52]  The scope of the margin [of appreciation] will vary according to the circumstances, the subject-matter and the background.  As a general rule, very weighty reasons would have to be put forward before the Court could regard a difference in treatment based exclusively on the ground of sex as compatible with the Convention.  On the other hand, a wide margin is usually allowed to the State under the Convention when it comes to general measures of economic or social strategy.  Because of their direct knowledge of their society and its needs, the national authorities are in principle better placed than the international judge to appreciate what is in the public interest on social or economic grounds, and the Court will generally respect the legislature’s policy choice unless it is ‘manifestly without reasonable foundation’.

 “weighty reasons may well be needed in a case of positive discrimination, but there is no good reason to impose a similarly high standard in cases of indirect discrimination…the proportionality review applicable in the present case must be made by reference to the usual standard….”

In other words, only good reasons are needed to justify indirect discrimination. 

Conclusions on the different methods of compliance

(a) The taxpayer could use his own computer and internet link.  For taxpayers without an online computer this would involve capital expenditure on the purchase of hardware and software and income expenditure on a monthly contract for broadband or dial-up link to the internet;

(b)The taxpayer could use an online computer belonging to a friend or family member assuming that friend or family member gave permission.  This would not be expected to involve expenditure on the part of the taxpayer.

(c) The taxpayer could use a public computer free of charge at a public library.

(d)The taxpayer could engage a professional agent to make the online submission on behalf of the taxpayer.

(e) At the request of the taxpayer, a friend or family member could make the online return submission on behalf of the taxpayer.

(f)  The taxpayer could use HMRC’s “phone filing” facility;

(g) The taxpayer could use computer at an online enquiry centre.

(a) Use of own computer

 (b) use of computer belonging to a friend or family member and (f) have friend of family member as agent

(c) use a computer at a public library.

“HMRC have assured us that they take security and taxpayer confidentiality very seriously, and all their online filing services for tax incorporate industry best practices to ensure that transaction online with these systems is both safe and secure”

Conclusion

Community Law

2 General implementation of Treaties.

(1)All such rights, powers, liabilities, obligations and restrictions from time to time created or arising by or under the Treaties, and all such remedies and procedures from time to time provided for by or under the Treaties, as in accordance with the Treaties are without further enactment to be given legal effect or used in the United Kingdom shall be recognised and available in law, and be enforced, allowed and followed accordingly; and the expression “enforceable EU right” and similar expressions shall be read as referring to one to which this subsection applies.

(2)….

(3)….

(4)The provision that may be made under subsection (2) above includes, subject to Schedule 2 to this Act, any such provision (of any such extent) as might be made by Act of Parliament, and any enactment passed or to be passed, other than one contained in this part of this Act, shall be construed and have effect subject to the foregoing provisions of this section; but, except as may be provided by any Act passed after this Act, Schedule 2 shall have effect in connection with the powers conferred by this and the following sections of this Act to make Orders in Council or orders, rules, regulations or schemes.

 . . .

3 Decisions on, and proof of, Treaties and EU instruments etc.

(1)For the purposes of all legal proceedings any question as to the meaning or effect of any of the Treaties, or as to the validity, meaning or effect of any EU instrument, shall be treated as a question of law (and, if not referred to the European Court, be for determination as such in accordance with the principles laid down by and any relevant decision of the European Court).

(2)Judicial notice shall be taken of the Treaties, of the Official Journal of the European Union and of any decision of, or expression of opinion by, the European Court on any such question as aforesaid; and the Official Journal shall be admissible as evidence of any instrument or other act thereby communicated of the EU or of any EU institution.

(3)…..

The European Court of Justice (“CJEU”) said in the early case of Simmenthal C-106/77:

“Every national court must, in a case within its jurisdiction, apply Community law in its entirety and protect rights which the latter confers on individuals and must accordingly set aside any provision of national law which may conflict with it, whether prior or subsequent to the Community rule.”

(a)   Compatibility with the Connvention;

(b)  Compatibility with the Charter;

(c)   ‘Ultra Vires’ - whether the regulations are within the scope of the PVD;

(d)  Proportionality.

Compatibility with the Convention

The Convention is part of EU law

“[Art 6 (2)] The Union shall respect fundamental rights, as guaranteed by the European Convention for the Protection of Human Rights and Fundamental Freedoms signed in Rome on 4 November 1950 and as they result from the constitutional traditions common to Member States, as general principles of Community law.”

Effect on the appellants’ cases

Compatibility with the Charter

Is Reg 40(2A) ultra vires the Treaty because of the Charter?

“In that regard, it must be recalled that, in accordance with the first sub-paragraph of article 6(1) EU, the Union recognises the rights, freedoms and principles set out in the Charter, ‘which shall have the same legal value as the Treaties’.” 

If Regulation 40(2A) is not consistent with the Charter, then I must disapply the regulation and allow the fourth appellant’s appeal against the decision that he is liable to file online because the automatic consequence of this is that he must abide by regulation 40(2A).

“Article 8  Protection of personal data

1. Everyone has the right to the protection of personal data concerning him or her.

2.  Such data must be processed fairly for specified purposes and on the basis of the consent of the person concerned or some other legitimate basis laid down by law.  Everyone has the right of access to data which has been collected concerning him or her, and the right to have it rectified.

3.  Compliance with these rules shall be subject to control by an independent authority.

Article 16 Freedom to conduct a business

The freedom to conduct a business in accordance with Union law and national laws and practices is recognised.

Conclusion

Ultra vires – whether the regulations are within the scope of the PVD

Regulations expressly permitted by European Directive?

“… A directive shall be binding, as to the result to be achieved, upon each Member State to which it is addressed, but shall leave to the national authorities the choice of form and methods….”

“Article 250

1.  Every taxable person shall submit a VAT return setting out all the information needed to calculate the tax that has become chargeable and for deductions to be made including, in so far as it necessary for the establishment of the basis of assessment, the total value of the transactions relating to such tax and deductions and the value of any exempt transactions.

2. Member States shall allow, and may require, the VAT return referred to in paragraph 1 to be submitted by electronic means, in accordance with conditions which they may lay down.

Is Reg 40(2A) ultra vires the PVD?

“Any taxable person liable for payment of VAT must pay the net amount of the VAT when submitting the VAT return provided for in Art 250.  Member States may, however, set a different date for payment of that amount or may require interim payments to be made.”

This means that it is within the discretion of individual member states.  There is nothing in the PVD which requires a member State to permit payment by cheque.

Proportionality in EU law

 [45] As regards, next, the effects which the principle of proportionality may have in this context, it must be emphasized that whilst the Member States may, in principle, adopt such measures, it is nevertheless the case that those measures are liable to have an impact on the national authorities' obligation to make an immediate refund under Article 18(4) of the Sixth Directive.

[46]  Thus, in accordance with the principle of proportionality, the Member States must employ means which, whilst enabling them effectively to attain the objective pursued by their domestic laws, are the least detrimental to the objectives and the principles laid down by the relevant Community legislation.

[47]  Accordingly, whilst it is legitimate for the measures adopted by the Member States to seek to preserve the rights of the Treasury as effectively as possible, they must not go further than is necessary for that purpose. They may not therefore be used in such a way that they would have the effect of systematically undermining the right to deduct VAT, which is a fundamental principle of the common system of VAT established by the relevant Community legislation.

[48] The answer to be given in that regard must therefore be that the principle of proportionality is applicable to national measures which, like those at issue in the main proceedings, are adopted by a Member State in the exercise of its powers relating to VAT, since, if those measures go further than necessary in order to attain their objective, they would undermine the principles of the common system of VAT and in particular the rules governing deductions which constitute an essential component of that system.

However, the principle of proportionality is applicable to national measures which, like those at issue in the main proceedings, are adopted by a Member State in the exercise of its powers relating to VAT, in that, if they went further than was necessary in order to attain their objective, they would undermine the principles of the common system of VAT…..

It is for the national court to examine whether or not the measures in question and the manner in which they are applied by the competent administrative authority are proportionate. In the context of that examination, if the national provisions or a particular construction of them would constitute a bar to effective judicial review, in particular review of the urgency and necessity of retaining the refundable VAT balance, and would prevent the taxable person from applying to a court for replacement of the retention by another guarantee sufficient to protect the interests of the Treasury but less onerous for the taxable person, or would prevent an order from being made, at any stage of the procedure, for the total or partial lifting of the retention, the national court should disapply those provisions or refrain from placing such a construction on them. Moreover, in the event of the retention being lifted, calculation of the interest payable by the Treasury which did not take as its starting point the date on which the VAT balance in question would have had to be repaid in the normal course of events would be contrary to the principle of proportionality.

“[13]  The Court has consistently held that the principle of proportionality is one of the general principles of Community law. By virtue of that principle, the lawfulness of the prohibition of an economic activity is subject to the condition that the prohibitory measures are appropriate and necessary in order to achieve the objectives legitimately pursued by the legislation in question; when there is a choice between several appropriate measures recourse must be had to the least onerous, and the disadvantages caused must not be disproportionate to the aims pursued.”

(a) It has a legitimate aim;

(b)It is appropriate to that legitimate aim;

(c) It goes no further than necessary and, where there is a choice, has recourse to the least onerous measure; and

(d)Its disadvantages are not disproportionate to its aim.

Does all VAT legislation have to be proportionate?

“When Member States are implementing Union Law, eg by enacting legislation pursuant to a Directive, they must exercise whatever discretion they have in compliance with the general principle of Union law, including proportionality….

Furthermore, Member States are also bound by the general principles of Union law, including proportionality, when acting within the field of Union law….

Furthermore, and even though it is for the Member State to decide the penalties imposed for breaches of its rules, the principle of proportionality also applies to criminal and administrative sanctions imposed for breach of rules in any way connected with the exercise of a Union right…”

“[65] the same is true of [what is now Art 273 PVD] pursuant to which the Member States are to take the necessary measures to ensure that taxable persons comply with their obligations relating to declaration and payment or impose other obligations which they deem necessary for the correct collection of the tax and for the prevention of evasion.

[66] Although those provisions allow Member States to take certain measures, they must not however go further than is necessary to attain the objectives mentioned in the preceding paragraph.”

[22] Under the common system of VAT, Member States are required to ensure compliance with the obligations to which taxable persons are subject and they enjoy in that respect a certain measure of latitude, inter alia, as to how they use the means at their disposal….

[26] However, the measures which the Member States may thus adopt must not go further than is necessary to attain the objectives of ensuring the correct levying and collection of the tax and the prevention of tax evasion.  Such measures may not therefore be used in such a way that they would have the effect of undermining the neutrality of VAT, which is a fundamental principle of the common system of VAT….

Is mandatory online filing proportionate?

“…may impose other obligations which they necessary for the correct levying and collection of the tax and for the prevention of fraud”

(a) It has a legitimate aim;

(b)It is appropriate to that legitimate aim;

(c) It goes no further than necessary and, where there is a choice, has recourse to the least onerous measure; and

(d)Its disadvantages are not disproportionate to its aim.

Does it go further than necessary?

“[96] In our judgment, the ‘reasonable excuse’ defence, albeit not the same as mitigation, strikes a fair balance between fairness to the taxpayer and the effective and economical deployment of the State’s resources.”

Disadvantages not disproportionate to its aim

Is the obligation to pay electronically disproportionate?

Conclusion

BARBARA MOSEDALE

TRIBUNAL JUDGE

RELEASE DATE: 30 September 2013