Finance Act 2026 contains various powers for HMRC to take some pretty draconian action against tax advisers who promote tax schemes. There are also some new powers which go way beyond tax schemes and refer to ‘sanctionable conduct’.
HMRC published a guidance note on 16 March (‘How HMRC deals with tax adviser sanctionable conduct’) explaining that if they suspect an adviser of sanctionable conduct, HMRC can demand the adviser’s working papers, audit files and other documents used to prepare the client’s accounts. If HMRC find any inaccuracy in the files, they can charge a penalty of £3,000 per inaccuracy.
They can also issue a ‘conduct notice’ with further penalties of eye-watering amounts.
Sanctionable conduct is where the tax adviser deliberately contributes to non-compliance intending to cause a loss of tax. The examples they give are:
claiming a tax repayment for a client who is not entitled to it; and
submitting an incorrect return on behalf of a client.
This is very alarming because it can be a very small step from innocent conduct to sanctionable conduct. If you submit a tax return on behalf of a client, you obviously do so deliberately; it is not very often that you will be able to claim that your dog hit the send button by accident. If the tax return is incorrect, the only thing that can save you from a possible £1m penalty for a single error is that you did not intend to cause a loss of tax. But if the tax return was incorrect, but you thought it was right (and the tax payable shown in the tax return was therefore less than it turned out to be), then you did intend to cause the tax to be reduced – and you have ticked all the boxes for sanctionable conduct.
If the penalty is more than £7,500, HMRC must publish your details – like your name and address, your business and sufficient other information to identify you clearly. Which is probably career ending.
How are you feeling about that? Maybe you never make a mistake and maybe HMRC never disagrees with anything you say. (If so, please give me a call. I have a job for you.)
It is not clear how this guidance note dovetails with the guidance note issued on 1 September about the completion of tax returns where there are matters of possibly uncertainty. I fear that it will not dovetail at all because that guidance merely set out the view of HMRC in various different circumstances. These new provisions are statutory, which are bound to take priority over guidance.
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Tax advisers: sanctionable conduct
Guidance is published on the new rules.
Finance Act 2026 contains various powers for HMRC to take some pretty draconian action against tax advisers who promote tax schemes. There are also some new powers which go way beyond tax schemes and refer to ‘sanctionable conduct’.
HMRC published a guidance note on 16 March (‘How HMRC deals with tax adviser sanctionable conduct’) explaining that if they suspect an adviser of sanctionable conduct, HMRC can demand the adviser’s working papers, audit files and other documents used to prepare the client’s accounts. If HMRC find any inaccuracy in the files, they can charge a penalty of £3,000 per inaccuracy.
They can also issue a ‘conduct notice’ with further penalties of eye-watering amounts.
Sanctionable conduct is where the tax adviser deliberately contributes to non-compliance intending to cause a loss of tax. The examples they give are:
claiming a tax repayment for a client who is not entitled to it; and
submitting an incorrect return on behalf of a client.
This is very alarming because it can be a very small step from innocent conduct to sanctionable conduct. If you submit a tax return on behalf of a client, you obviously do so deliberately; it is not very often that you will be able to claim that your dog hit the send button by accident. If the tax return is incorrect, the only thing that can save you from a possible £1m penalty for a single error is that you did not intend to cause a loss of tax. But if the tax return was incorrect, but you thought it was right (and the tax payable shown in the tax return was therefore less than it turned out to be), then you did intend to cause the tax to be reduced – and you have ticked all the boxes for sanctionable conduct.
If the penalty is more than £7,500, HMRC must publish your details – like your name and address, your business and sufficient other information to identify you clearly. Which is probably career ending.
How are you feeling about that? Maybe you never make a mistake and maybe HMRC never disagrees with anything you say. (If so, please give me a call. I have a job for you.)
It is not clear how this guidance note dovetails with the guidance note issued on 1 September about the completion of tax returns where there are matters of possibly uncertainty. I fear that it will not dovetail at all because that guidance merely set out the view of HMRC in various different circumstances. These new provisions are statutory, which are bound to take priority over guidance.
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