From 1 April 2026 — less than a week away — HMRC gains sweeping new powers over tax advisers. The headline? Unlimited penalties, forced disclosure of client files, and your name published on GOV.UK for all to see.
If you advise on tax in any capacity, this isn’t a “keep an eye on it” situation. It’s a “clear your diary and read this now” situation.
What’s Changing
The Finance Act 2026 (s250 and Schedule 22) replaces the existing “dishonest conduct” regime under Schedule 38 of the Finance Act 2012 with something considerably broader: sanctionable conduct.
Under the old rules, HMRC could only come after tax advisers for outright dishonesty. That was already serious — but the threshold was high, and cases were relatively rare. The new regime lowers that threshold significantly.
Under the new rules, a tax adviser engages in sanctionable conduct if, in the course of acting as a tax adviser, they do something — or omit to do something — with the intention of bringing about a loss of tax revenue.
That sounds targeted at bad actors, and in principle it is. But the drafting is broad enough to worry any adviser who’s ever taken an aggressive but defensible position on a client’s behalf.
Who Counts as a “Tax Adviser”?
The definition is wider than you might expect. It catches anyone who:
- Advises a person on their tax affairs
- Acts as their agent in relation to tax
- Provides assistance for non-tax purposes, if the adviser knows or suspects the assistance will be used in connection with the client’s tax affairs
That last category is the eyebrow-raiser. It potentially catches lawyers, corporate finance advisers, and even accountants working on non-tax engagements where the output has tax implications. If you’re a management accountant preparing projections used to support a tax claim, this could — on a strict reading — apply to you.
What HMRC Can Do
The new regime gives HMRC a three-stage toolkit:
1. File Access Notices
If HMRC has “reasonable grounds” to suspect sanctionable conduct, it can issue a file access notice demanding your working papers and any documents created or used in the course of advising clients on tax. This covers current and former clients.
Think about that for a moment. One suspicion about one engagement, and HMRC could potentially access files across your entire practice.
There are exclusions — privileged communications, pending appeal documents, personal records, and anything older than 20 years. But the scope remains vast. Fail to comply with the notice and you face fixed and daily penalties. Produce a document containing inaccuracies, and that’s up to £3,000 per inaccuracy.
2. Conduct Notices and Penalties
If HMRC determines that sanctionable conduct has occurred, it issues a conduct notice setting out its assessment. The adviser gets an opportunity to dispute it — though HMRC’s guidance is thin on exactly how that works in practice.
The penalty calculation is based on potential lost revenue and adjusted for cooperation (or lack thereof) and prior history. The numbers:
- Minimum penalty: £7,500
- Maximum penalty (first offence): £1,000,000
- Maximum penalty (six or more prior offences): Unlimited
Let that sink in. An unlimited penalty for a tax adviser. Not a criminal sanction — an administrative penalty imposed by HMRC at its own discretion.
3. Public Naming
Where a penalty exceeds £7,500 — which is the minimum — HMRC will publish the adviser’s details on GOV.UK. Sections 251 to 254 of the Finance Act 2026 give HMRC additional discretion to publish even in other circumstances, including where it has suspended the adviser’s access to online agent services.
For sole practitioners and small firms, this is reputational dynamite. A listing on GOV.UK as a sanctioned tax adviser would be devastating, and it sits alongside the existing tax defaulters list that already names taxpayers who’ve been penalised for deliberate non-compliance.
The Grey Area Problem
Here’s where it gets uncomfortable. The legislation targets conduct carried out “with the intention of bringing about a loss of tax revenue.” But tax advice frequently involves navigating areas where the law is unclear, where reasonable professionals disagree, and where the boundary between aggressive-but-legitimate planning and non-compliance is genuinely contested.
ICAEW has raised exactly this concern, noting that the drafting could apply to “legitimate differences in legal interpretation, technical disputes over complex legislation and cases where HMRC and advisers both act in good faith but disagree.”
During the Finance Bill debates, the Exchequer Secretary Dan Tomlinson offered some reassurance: the rules “will not affect advisers who act in good faith, or who take a credible view as to what the law requires of their clients.”
That’s welcome. But ministerial statements during parliamentary debates don’t carry the force of law. They’re an interpretive aid at best. What matters is what the legislation says, and what HMRC’s detailed technical guidance (still unpublished as of today) will say when it arrives.
Double Jeopardy Risk
There’s another wrinkle that hasn’t received enough attention. The regime can apply to both organisations and individuals. Could HMRC penalise a firm and the individual adviser who provided the advice, for the same act of sanctionable conduct?
ICAEW has asked for clarification. HMRC hasn’t provided it yet. That ambiguity alone should be keeping compliance officers awake.
What This Means for the Wider Market
The timing is striking. This regime arrives alongside mandatory agent registration, Making Tax Digital for income tax, multi-factor authentication for agent services, and the restoration of CIS late-filing penalties. It’s the most significant overhaul of the regulatory environment for tax practitioners in a generation — and it’s all landing in the same tax year.
For larger firms with dedicated compliance functions, this is manageable. Uncomfortable, perhaps, but manageable. Review your engagement letters. Document your advice comprehensively. Ensure you can demonstrate that positions taken were based on a credible interpretation of the law.
For smaller firms and sole practitioners, the burden is proportionally heavier. The cost of defending a file access notice, the reputational risk of public naming, and the sheer scale of the potential penalties create an environment where conservative advice becomes the rational response — regardless of whether more aggressive positions would be entirely defensible.
That may be exactly the behavioural shift HMRC is hoping for. Whether it’s the right outcome for the tax system is another question entirely.
What You Should Do Before 1 April
- Review your engagement documentation. Every piece of advice should have a clear audit trail showing the legal basis, the facts relied upon, and the reasoning for the position taken.
- Check your file retention policies. HMRC can access documents going back 20 years. Make sure your records are organised and retrievable.
- Examine your professional indemnity cover. Does your PII extend to regulatory defence costs? Will it cover penalties? Talk to your broker.
- Train your team. Everyone who gives tax advice — not just the partners — needs to understand what sanctionable conduct means and where the boundaries are.
- Watch for HMRC’s detailed guidance. The initial guidance is high-level. The devil will be in the detail, and that detail hasn’t been published yet.
Get Ahead of the Change
The new sanctionable conduct regime represents a fundamental shift in how HMRC regulates tax advisers. Whether you see it as a necessary crackdown on bad actors or a disproportionate expansion of HMRC’s powers, the practical implications are the same: advisers need to act now.
If you want to discuss how these changes affect your practice, or need help reviewing your compliance procedures before 1 April, get in touch. This is exactly the kind of regulatory shift where getting proper advice early saves you from expensive problems later.