201702.03

Mentally Ill Woman Had ‘Reasonable Excuse’ for Chaotic Tax Affairs

Tax formFilling in personal tax returns can be burdensome and that is particularly so for those who suffer from mental illness. In one unusual case that highlighted the issue, a tribunal found that a woman’s paranoid schizophrenia amounted to a reasonable excuse for her long-term failure to keep her tax affairs in order.

Over a number of years, the woman had only put in sporadic returns and had failed to pay Income Tax when it fell due. As a result, HM Revenue and Customs had issued her with numerous surcharges and late payment penalties. Although most of them were for only £100, they totalled more than £5,000.

In upholding her appeal, the First-tier Tribunal (FTT) noted that her diagnosis with paranoid schizophrenia coincided with the year in which her tax affairs began to fall into disarray. Although she was apparently capable of understanding and taking part in the proceedings, she was prey to fixed and irrational beliefs and was clearly incapable of dealing with her chaotic finances.

Her mental health problems meant that she needed professional tax advice but was at the same time precluded from giving the instructions required to obtain it. In the circumstances, the FTT found that she had a reasonable excuse in respect of the entire period of her default and quashed the relevant surcharges and penalties.

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