HMRC will introduce new rules on 1 April 2026, giving it broader powers to act against tax advisers. The changes, set out in the Finance Act 2026, replace the existing “dishonest conduct” test with a new “sanctionable conduct” standard.
Under the previous rules, introduced in 2012, action could be taken where an adviser acted dishonestly to reduce tax liabilities. The updated legislation instead focuses on whether an adviser intended to cause a loss of tax revenue, thereby lowering the threshold for intervention.
HMRC data shows the earlier dishonest conduct rules were used infrequently, with fewer than five cases pursued between April 2021 and April 2025, all in 2023/24.
The new framework allows HMRC to impose penalties based on potential lost revenue (PLR). A single breach can attract a penalty of up to 70% of PLR, capped at £1 million. This rises to 85% for multiple breaches, up to £5m, and up to 100% of PLR with no upper limit for repeated infractions. Penalties may also be applied to both firms and individuals involved.
HMRC guidance states that sanctionable conduct may include knowingly submitting incorrect tax returns or claiming repayments to which a client is not entitled. Advisers fined more than £7,500 will have their details published, with no right of appeal against publication.
Professional bodies, including ICAEW and CIOT, have raised concerns about the scope and interpretation of the new rules, particularly around ambiguity and potential application to legitimate disputes.
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