Mental health is a reasonable excuse

16 May 2017

A couple of recent decisions have shown tax tribunal judges showing their human side and demonstrating that mental health is a reasonable excuse. However, it is notable that they approached the matter in slightly different ways regarding the identity of the appellants.

In the first case the taxpayer incurred penalties of nearly £1,500 for late filing of returns and payment of tax. There was incontrovertible evidence that he was suffering from anxiety, stress and depression. HMRC refused to cancel the penalties. They argued that ‘where an illness is an ongoing condition a taxpayer would be expected to make arrangements for making and sending the tax return on time’.

The tribunal took a more sympathetic line. It accepted that serious mental illness is an ongoing condition and simply does not allow a person to deal with menial day to day activities. The tribunal also noted that ‘slowly but surely, with the help of his son, the taxpayer recovered from his illness’ and was able to make all outstanding returns and payments. The conclusion was that HMRC had not properly applied its own criteria and that anxiety, depression and panic attacks suffered by the taxpayer constituted as a reasonable excuse. The penalty was cancelled.

Although this was an appropriate judgement, there is one unsatisfactory element to this case - the individual involved (whose name we don’t include here) was identified in the published judgement. That seems unfortunate given that his health problems are now in the public domain. This contrasts with a case heard earlier this year, where the taxpayer was suffering from schizophrenia. The tribunal waived the penalties but said ‘while I have found that the appellant’s mental health amounts to a continuing reasonable excuse for her failure to deal properly with her tax affairs, it has no relevance to her liability to file returns and pay tax. All persons, with or without illness, must pay their tax.’

In other words mental illness cannot be a reason for a person to opt out of the tax system completely. But the interesting point here is that the tribunal decided to anonymise the decision, on the grounds that ‘mental illness should not be a bar to challenging HMRC decisions, so it is right to grant anonymisation of this decision, so other litigants with mental illness are not discouraged from appealing’.

I am surprised that this principle was not followed in the most recent case. There is something unacceptable about a person’s medical history being put into the public domain in order to defend their rights as taxpayers.

So, perhaps two and a half cheers for the tribunals for their approach to mental health issues. They clearly recognise that mental health problems can have a totally debilitating effect on a person’s ability to manage their tax affairs. I reserve the other half cheer until the day when all such appeals are published anonymously as a matter of routine.

For more information please get in touch with Andrew Hubbard, or your usual RSM contact.