We have withheld and changed identifying details to protect the client’s privacy. The outcome reflects the facts of this individual case and does not guarantee the same result in another case.
When this client first approached us, he had lived with unresolved tax problems for many years.
He suffered from post-traumatic stress disorder, commonly known as PTSD. The condition had affected his ability to manage correspondence, organise records and deal with his tax affairs. In addition, his age made the growing administrative burden harder to manage.
Over time, the situation became overwhelming.
The client had stopped dealing with VAT returns, Self Assessment and HMRC correspondence. He also no longer had access to the VAT number connected with the historic returns. Meanwhile, unpaid tax continued to create worry and uncertainty.
By the time he asked for help, he felt deeply distressed about his position. He feared the size of the debt, possible penalties and what HMRC might do next.
However, the immediate priority was not to judge how the situation had developed. Instead, we needed to establish the facts, rebuild the missing history and create a realistic route forward.
The Tax Problems We Identified
The case involved several connected issues:
- 31 historic VAT returns remained outstanding;
- the client had not submitted 12 years of Self Assessment tax returns;
- VAT and other tax liabilities remained unpaid;
- the client no longer had the details of his historic VAT registration;
- HMRC had issued a new VAT number;
- penalties and interest required review and clarification;
- the client’s PTSD had affected his ability to manage his tax affairs; and
- the client needed a realistic settlement that took account of his circumstances.
The number of missing returns made this more than a routine late-filing case.
Before we could discuss payment, we first needed to calculate the correct tax position. Otherwise, neither the client nor HMRC could know what the final debt should be.
Our article on why clients sometimes wait years before seeking tax help explains how fear and poor health can cause tax problems to grow quietly over time.
Understanding How PTSD Affected the Client
A health condition does not automatically provide a reasonable excuse for every missed tax deadline. HMRC considers each case on its own facts.
Therefore, it was important to explain more than the client’s diagnosis.
We needed to understand:
- when the condition affected him;
- how it affected his ability to manage financial paperwork;
- whether it prevented him from communicating with HMRC;
- why he could not appoint an adviser earlier;
- whether anybody had helped him during the relevant period; and
- what changed when he finally sought professional support.
This distinction matters.
HMRC’s own guidance says that a person should explain how their mental health condition harmed their ability to meet the particular tax duty. Supporting evidence may also help HMRC understand the relevant period and the effect of the condition.
In this case, the large number of historic returns showed that the problem had developed over a long period. As a result, we needed to present a clear timeline rather than rely on a general statement about poor health.
Reconstructing 12 Years of Tax Affairs
The client did not have a complete and organised set of records covering all 12 years.
Therefore, we began by gathering the information that remained available. This included HMRC correspondence, bank records, income details and documents from other sources.
We then worked through the years in order.
For each year, we needed to establish:
- the client’s sources of income;
- any allowable business costs;
- whether HMRC had already issued an assessment;
- what tax the client had paid;
- whether penalties or interest appeared on the account; and
- what information remained missing.
Where records were incomplete, we used the available evidence to rebuild the position as accurately as possible. We also kept the calculations consistent across the full period.
This work allowed us to prepare and submit 12 historic tax returns.
Submitting the returns did not immediately solve every issue. However, it replaced estimates and uncertainty with actual figures. It also gave us a reliable basis for discussions with HMRC.
Preparing 31 Historic VAT Returns
The VAT position created another major part of the work.
Thirty-one VAT returns remained outstanding. In addition, the client no longer had access to the original VAT registration details, while HMRC had issued a new VAT number.
First, we needed to establish which VAT periods belonged to the historic registration. We also needed to separate those periods from any activity linked to the newer VAT number.
Next, we reviewed the available sales, purchases and payment records for each VAT period. We then calculated the VAT due and prepared the missing returns.
This required care because one mistake could affect several later periods. For example, an incorrect opening balance or duplicated figure could distort the final VAT liability.
After reviewing and reconciling the available information, we submitted all 31 historic VAT returns.
The submissions brought the client’s reporting position up to date. More importantly, they allowed HMRC and the client to work from the same set of figures.
If you have missing VAT returns, our guide to what happens when HMRC letters remain unanswered explains why early action can prevent further escalation.
Resolving the VAT Registration Problem
The change in VAT number added another layer of difficulty.
Without a clear record of the old and new registrations, payments and returns could appear under different references. This can make it difficult to understand which amounts belong to which period.
Therefore, we communicated with HMRC to clarify:
- the historic VAT registration;
- the periods covered by the old registration;
- the new VAT number;
- the returns linked to each registration; and
- how HMRC had allocated liabilities and payments.
This step was essential. Simply submitting returns under the wrong reference could have created further confusion.
By clarifying the registration history, we helped create a complete record of the client’s VAT position.
Reviewing Penalties and the Reasonable-Excuse Position
Once we had prepared the returns, we reviewed the penalties and interest shown on the client’s accounts.
We asked HMRC to clarify:
- which penalties applied;
- which return or payment period created each penalty;
- how HMRC had calculated the amounts;
- whether the client still held appeal rights; and
- whether HMRC had fully considered the client’s circumstances.
We also explained how the client’s PTSD and age had affected his ability to deal with his tax affairs.
However, a diagnosis alone does not settle a reasonable-excuse claim. HMRC looks at the effect of the condition, the relevant dates and whether the person corrected the failure without unreasonable delay once they could act.
The client’s cooperation after appointing us therefore mattered. He worked with us to collect information, prepare the missing returns and bring his affairs up to date.
We presented these facts so that HMRC could consider the penalty position on a fair and informed basis.
Reaching a Settlement with HMRC
After we submitted the outstanding VAT and tax returns, we could establish a clearer picture of the client’s total position.
We then prepared a settlement proposal based on the known liabilities and the client’s circumstances.
HMRC does not have to accept every payment or settlement offer. It will usually consider the amount due, the taxpayer’s financial position, their ability to pay and the prospects of recovering the debt.
Therefore, the proposal needed to remain realistic and supported by evidence.
After further communication, HMRC accepted the settlement offer.
This gave the client a defined route out of a situation that had previously felt impossible. Instead of facing unknown liabilities, missing returns and several unresolved HMRC issues, he now had an agreed outcome.
Case Summary
| Position when the client approached us | Position after our work |
| 31 VAT returns outstanding | All 31 historic VAT returns submitted |
| 12 years of tax returns outstanding | All 12 historic tax returns submitted |
| Original VAT details unavailable | Historic and new VAT registration positions clarified |
| VAT and tax liabilities uncertain | Liability calculated using completed returns and available records |
| Penalties required explanation | Penalty calculations and reasonable-excuse position reviewed with HMRC |
| Client felt overwhelmed and unable to cope | Accounts Tax Group handled the work and HMRC communication |
| No clear way to resolve the debt | HMRC accepted a settlement offer |
More Than a Filing Exercise
This case involved a great deal of technical work. However, it also required patience and sensitive communication.
The client had carried the emotional weight of the problem for years. Each missing return made the next step feel harder. Consequently, he had reached a point where he did not know how to begin.
By taking the work one stage at a time, we turned a large and confusing problem into a series of practical tasks:
- obtain the available records;
- confirm the VAT registrations;
- rebuild the missing years;
- submit the tax returns;
- submit the VAT returns;
- clarify the penalties and interest;
- explain the client’s personal circumstances; and
- agree a way to settle the debt.
The final outcome mattered. However, the client also gained something less visible: relief from the uncertainty that had followed him for years.
Practical Guide
If poor health has contributed to outstanding tax returns, consider the following steps:
- Do not wait for perfect records. Contact an adviser with the information you currently hold.
- Collect every HMRC letter. Put the correspondence in date order and identify the latest deadline.
- List the missing returns. Include Self Assessment, VAT, PAYE and company returns where relevant.
- Write a health timeline. Explain when the condition affected you and how it prevented you from meeting the tax duty.
- Gather supporting evidence. Relevant medical or professional evidence may help HMRC understand the situation.
- Check VAT registration details. Historic and current VAT numbers must link to the correct periods.
- Calculate the tax before discussing payment. A payment proposal needs an accurate starting figure.
- Review every penalty. Check the type, date, calculation and available appeal rights.
- Explain affordability honestly. HMRC may request details of income, spending, assets and debts.
- Keep future returns up to date. HMRC will normally expect the taxpayer to maintain current compliance while resolving older debts.
Frequently Asked Questions
Can PTSD provide a reasonable excuse for late tax returns?
It can, depending on the facts. The taxpayer must normally explain how PTSD affected their ability to meet the specific tax obligation. HMRC may also consider supporting evidence, the relevant period and how quickly the taxpayer acted once they could do so.
Can HMRC cancel or reduce penalties because of poor mental health?
HMRC may cancel a penalty if it accepts that the taxpayer had a reasonable excuse. Other penalty reductions may depend on separate rules. However, HMRC reviews each penalty and each period individually, so a health condition does not guarantee cancellation.
Can an accountant submit several years of missing returns?
Yes. An authorised accountant can prepare historic returns and communicate with HMRC. However, the accountant will need enough evidence to calculate the position on a reasonable and supportable basis.
What happens if I no longer know my VAT number?
An adviser can help check available records and contact HMRC. It is important to identify the registration that applies to each historic VAT period before submitting returns or allocating payments.
Will HMRC agree to settle a large VAT and tax debt?
HMRC may consider a payment arrangement or another appropriate proposal based on the circumstances. It will normally want accurate returns, full financial information and a realistic offer. Acceptance is not automatic.
Will HMRC consider my age as well as my health?
HMRC should consider the taxpayer’s abilities, circumstances and experience when reviewing a reasonable excuse. Age alone may not provide an excuse, but its practical effect, together with health and other personal factors, may form part of the full picture.
Where to Find Official HMRC Information
For current official guidance, see:
- HMRC guidance on reasonable excuse and mental health, which explains how HMRC considers the effect of a mental health condition.
- How HMRC establishes a reasonable excuse, including the importance of facts, evidence and acting without unreasonable delay.
- Appeal a tax penalty, explaining how to challenge certain HMRC decisions and penalties.
- VAT penalties and interest, covering the current VAT late-submission penalty system.
- If you cannot pay your tax bill on time, explaining the information HMRC may request when considering payment support.
- Get help from HMRC if you need extra support, covering additional help for people whose health or personal circumstances make it difficult to deal with HMRC.
The rules depend on the type of return, the relevant dates and the facts of the case. Therefore, taxpayers should check the current guidance and seek professional advice where necessary.
💡 Key Takeaway
Even a tax position involving 31 missing VAT returns and 12 years of tax returns can become manageable when somebody approaches it in the right order.
Poor mental health does not automatically remove tax liabilities or penalties. However, HMRC should consider how a condition affected the taxpayer’s ability to comply.
In this case, rebuilding the records, submitting every outstanding return, clarifying the VAT registrations and explaining the client’s circumstances created a route towards settlement.
The problem had taken years to develop, but asking for help allowed the client to begin moving forward.
Need Help?
If poor health, age or difficult personal circumstances have left you with outstanding VAT returns, missing tax returns or a growing HMRC debt, Accounts Tax Group can help you understand the position.
We can reconstruct historic records, prepare outstanding returns, communicate with HMRC and review whether the facts may support a reasonable-excuse claim. We can also help you prepare a realistic proposal once the correct liability becomes clear.
You do not need to resolve everything before contacting us. An honest first conversation can provide the starting point.
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