As with so many areas of tax of the years, HMRC introduces legislation for a particular reason and then we see a gradual ‘creep’ in those powers. From 1 April 2026, we see this yet again.
FA 2012 introduced a regime to punish dishonest conduct by tax agents. Let’s be clear: such agents deserve punishing. However, FA 2026 has now extended those rules so that they apply to tax agents who engage in sanctionable conduct.
This is defined as:
‘…If, in the course of acting as a tax adviser, the person does something with the intention of bringing about a loss of tax revenue.’
Doing something includes omitting to do something.
Under the new rules, HMRC can:
- request access to a tax adviser’s files where it has reasonable grounds to suspect that they have engaged in sanctionable conduct, with possible penalties of up to £3,000 for each inaccuracy;
- charge penalties of between £7,500 and £1m; and
- publish their details.
Dishonesty is well understood but what does doing ‘something with the intention of bringing about a loss of tax revenue’ mean? The law does not say.
HMRC guidance gives examples of sanctionable as, knowingly:
- 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; and
- failing to notify HMRC, on behalf of a client, that tax is due.
HMRC then states:
‘Sanctionable conduct means deliberately doing the wrong thing. It does not include tax advisers who make mistakes while trying to do the right thing.’
So if intentional means deliberate, what was the point of changing the law? And if there is a difference from the old rules, what is it? Presumably, HMRC must believe there is a difference. The Explanatory Notes to the Finance Bill state:
‘The effect of this is to bring into the scope of the Schedule 38 regime any conduct by a tax adviser which is done with the intention of bringing about a loss of tax revenue (whether or not such conduct can be said to be ‘dishonest’). An example of conduct which might be in scope of the definition of ‘sanctionable conduct’ is where a tax adviser submits a tax return to HMRC on behalf of a client which the adviser knows to contain an inaccuracy and where the adviser does this with the intention that their client should pay less tax than they owe by law.’
As with so much legislation over recent years, it is poorly drafted and hence ambiguous, leaving it to HMRC to make subjective decisions on when to use it and when not. The law and its scrutiny should be better than it currently is. No doubt, in ten years via a court case we will be told what the new rules may or may not mean.