Owners of small businesses will no longer be forced to file tax returns online, after the European courts found that the demand infringed their human rights.
The ruling means that the elderly, disabled or people without an internet connection will also be allowed to continue to file their documents on paper.
In April 2012, regulations were changed which required almost all firms to file their returns electronically.
The only exceptions were if the taxpayer was a member of a religion which forbade the use of technology or if a business had gone into insolvency.
However, a number of business owners who had taken issue with the new system, took their case to the courts, who have now judged the policy is in breach of the European Convention on Human Rights.
Among those who had been penalised were elderly entrepreneurs, who were not computer literate, disabled people and those who lived or worked in areas with an unreliable internet connection.
The ruling has been welcomed by the Federation of Small Businesses (FSB), who said it would benefit many companies – especially those based in remote areas.
The taxman’s change of heart follows a court victory last year for three small businesses, which was supported by the Low Incomes Tax Reform Group.
A spokesman for the group said he was delighted that two years of hard work had paid off, although added that it was regrettable that the business owners, their advisors and taxpayers as a whole have had to wait so long for an outcome.