New Powers to Penalise Tax Advisers: What You Need to Know
HMRC has long had tools at its disposal to pursue taxpayers who bend the rules. Now, the spotlight has shifted firmly onto the advisers who help them do it. The Finance Bill 2025-26 introduces significant amendments targeting tax advisers suspected of facilitating non-compliance with financial penalties, investigatory powers, and public naming all in the armoury.
Not Entirely New Territory
Those with long memories in the profession will recall the Tax Agents: Dishonest Conduct regime under Schedule 38 of the Finance Act 2012, a framework that has existed for over a decade but has, in practice, been rarely deployed. The Finance Bill amends Schedule 38, renaming it "Tax advisers: sanctionable conduct" and considerably broadening its reach. Where the old regime required dishonesty, the new provisions replace "dishonest conduct" with "sanctionable conduct", defined as acting "with the intention of bringing about a loss of tax revenue", a materially lower threshold that HMRC will find significantly easier to assert.
What Constitutes Sanctionable Conduct?
A person engages in sanctionable conduct if, in the course of acting as a tax adviser, they do something with the intention of bringing about a loss of tax revenue, including accounting for less tax than a client is required to account for by law. Tax Adviser In practical terms, this can include knowingly claiming a tax repayment for a client who is not entitled to it, or submitting an incorrect tax return to HMRC on a client's behalf. The conduct must be intentional rather than negligent, but advisers should not take false comfort from that distinction, HMRC's view of intent and an adviser's own understanding of their actions may diverge considerably.
The Investigatory Process
Where HMRC suspects sanctionable conduct, it will issue a file access notice requiring the adviser to produce working papers and audit files, for example, any documents used to prepare the client's accounts. If those working papers contain even a single inaccuracy, HMRC can charge a penalty of up to £3,000. Notably, the Finance Bill also removes the requirement for prior tribunal approval before issuing a file access notice, approval from a senior HMRC officer will now suffice, making the investigatory process considerably more streamlined from HMRC's perspective.
Penalties and Public Naming
Where HMRC concludes that sanctionable conduct has occurred, a conduct notice will be issued and financial penalties will apply, calculated by reference to the potential lost revenue attributable to the adviser's actions. Those penalties are capped at £1 million for a first breach. Reduction is available based on the quality of disclosure, though minimum penalty floors apply: 35% for prompted disclosures and 20% for unprompted.
Beyond the financial consequences, where a penalty exceeds £7,500, HMRC must publish the adviser's details on, and the adviser cannot appeal against the decision to publish. HMRC may also publish the name of the company the adviser works or worked for if needed to make their identity clear.
Effective Date and A Word of Caution
These provisions take effect from 1 April 2026. It is to be hoped that HMRC will exercise them proportionately and with proper evidential rigour before asserting sanctionable conduct. However, hope is not a strategy. Advisers who receive any communication suggesting HMRC is investigating their conduct should seek specialist advice promptly and be prepared to respond firmly and comprehensively. These provisions represent a genuine shift in the regulatory landscape for the profession.
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