When might someone not have capacity to make a decision and what do you do in this situation?

To have capacity one must be able to understand the information, retain it, weigh it up and communicate a decision. Lack of capacity can be a temporary or permanent disturbance to the brain/mind and can be due to many things including head trauma, mental health conditions, dementia, altered state/loss of consciousness etc. Unwise decisions do not necessarily mean a lack of capacity.Ensure all practicable help is given to the patient before assuming they lack capacity (e.g. if there are communication difficulties).
If a patient is tested and found to lack capacity then you should act in the patient's best interests (which may not always align with autonomous wishes). This involves considering all relevant information, the possibility of future capacity (i.e. can you wait until they have capacity), maximising participation, find out the patient's views (wishes, feelings, beliefs, values), consult others' opinions (named consultees/carers/attorneys), avoiding discrimination and choosing the option which is least restrictive of basic rights & freedoms i.e. keeping as many doors open as possible.

Extra info: According to the UK Mental Capacity Act (MCA), you must assume capacity unless proven otherwise. The details of the MCA only apply to adults aged 16 years and over. Capacity is judged for each particular time and issue, i.e. someone may be able to decide if they want tea or coffee but unable to decide whether to have a risky operation, or if they have progressive dementia then over time they may be unable to make a decision on the same issue.