From 1 April 2026, HMRC have new powers to deal with dishonest tax advisers. The new 'sanctionable conduct powers' replace the previous dishonest conduct powers, with many professional bodies criticising the new rules for being too broad.
Under the New powers, HMRC can investigate and penalise any tax adviser who intentionally contributes to a loss of tax.
'Dishonest conduct' was previously described by HMRC as being:
- 'When an individual acting as a tax agent does something dishonest with a view to bringing about a loss of tax'.
The new rules will take stronger action against tax advisers who deliberately contribute to non-compliance or intentionally bring about a tax loss.
HMRC give two examples of what may be classed as sanctionable conduct:
- Claiming a tax repayment for a client who is not entitled to it.
- Submitting an incorrect tax return to HMRC on behalf of a client.
If an adviser is suspected of sanctionable conduct, HMRC can issue a File Access Notice. The adviser will then need to provide HMRC with the working papers and other documents relevant to the client's tax affairs.
For one inaccuracy in the working papers:
- A penalty of £3,000 can be charged.
For further inaccuracies:
- Penalties of up to £3,000 for each inaccuracy can be charged.
If an adviser refuses to provide papers:
- A £300 penalty will be charged initially, followed by daily penalties of £60.
- In more serious cases, the tribunal may approve £1,000 daily penalties.
If HMRC decide that an adviser has conducted sanctionable conduct:
- They will send the adviser a Conduct Notice and charge penalties.
Penalties for sanctionable conduct will be calculated based on the Potential Lost Revenue (PLR), and if the penalties charged are over £7,500, HMRC must publish the adviser's details.
The Institute of Chartered Accountants in England and Wales (ICAEW) said, "As can be seen, these terms are defined quite broadly. The ICAEW has raised concerns that the legislation is drafted too widely, with the result that it 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".
The Chartered Institute of Taxation (CIOT) said "The term ‘sanctionable conduct’ is new and untested, making appeals likely in the early days. This will consume HMRC's time and money as well as that of advisers. Amending the legislation to target ‘deliberate behaviour’ would be more straightforward as this is a term the courts have already defined, clearly".
For more detail on these measures, including the practical implications for advisers, see our subscriber guide: Penalties: Tax advisers (sanctionable/dishonest conduct)
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Penalties: Tax advisers (sanctionable/dishonest conduct)
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External links
How HMRC deals with tax adviser sanctionable conduct
CIOT - Representation from CIOT for the Finance Bill 2025-26