HMRC's approach towards penalties - tax oversights for clients with health issues

This article was written as a response to a Readers’ Forum query in Taxation. Our response was published on 10 March 2025.

The taxpayer had appointed a Power of Attorney when they were first diagnosed with Alzheimers. subsequently, the taxpayer’s condition deteriorated such that he was unable to manage his affairs. When the PoA took over the taxpayer’s finances, it came to light that he had omitted taxable income over a number of years. The question was whether the Alzheimer’s diagnosis was sufficient to mitigate penalties.

For full mitigation of penalties, a person must generally show they have taken reasonable care with their tax affairs. Whilst there is no formal documentation relating to the inaccuracies in a return as a result of Alzheimer’s specifically, HMRC’s manuals state that “‘reasonable care’ cannot be identified without consideration of the particular person’s abilities and circumstances. HMRC recognises the wide range of abilities and circumstances of those persons completing returns or claims.” (CH81120)

In this case, if the medical evidence available shows that the taxpayer had Alzheimer’s at the time that C was preparing and submitting his tax return, it would be likely that this would count as a reasonable excuse for mitigation of penalties.

The fact that C has appointed a PoA to ensure all his affairs could be managed demonstrates a level of care (albeit that C may not have been thinking solely of his tax affairs at the time) towards C’s affairs generally and indicates conscientiousness.

In order to make an argument for reasonable excuse based on Alzheimer’s, the person must explain to HMRC the nature of the illness, how it affected the submission of the tax returns (and inaccuracies) and provide appropriate evidence (the medical certificate). The fact that the omission was remedied as soon as possible will also be taken into account.

Alzheimer’s affects memory and this fact along with a medical note would most likely demonstrate that omission of the capital gain and other areas occurred despite C taking reasonable care to the best of his capabilities at the time. This in our view should be sufficient for HMRC to reduce penalties to £nil assuming the timeline of illness corresponds to the omissions.

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