In responses to consultations, ICAEW encouraged the government to reconsider its plans, which would introduce a legal requirement for tax advisers to register with HMRC and introduce significant new penalties for advisers based on their client’s underpaid tax. Penalties could be issued for any tax return where HMRC considers more tax is due, even if the tax adviser has not acted improperly. Draft legislation for the Finance Bill 2025/26 also proposes the introduction of a strict liability criminal offence for failure to disclose a tax avoidance scheme.

ICAEW explained it is supportive of policies that aim to raise standards in the tax market and drive out the bad actors who cause considerable harm to the tax system. However, it said these proposals don’t achieve those objectives and would not improve standards in the tax market. Instead, the Institute said that the measures would drive many professional tax advisers out of the market and impose considerable extra burdens on the vast majority of tax professionals who help support good tax compliance.

ICAEW added that the wider public impact would:

• potentially deny taxpayers access to tax advice as advisers exit the market;
• make tax advice unaffordable for many businesses and other taxpayers;
• undermine the UK’s long-term tax compliance culture;
• harming the perception of the UK tax system internationally as a good place to do business; and
• weaken the UK’s professional and business services sector.

Alan Vallance, ICAEW Chief Executive, said:

“Our members already tell us it’s too complicated and too expensive to do business, and rather than achieving the government’s stated objectives these proposals will simply add costs and burdens to businesses, some of whom may find they can no longer access the tax advice they need.

“Under these plans, the UK will become the most difficult tax environment in the OECD, with tax advice unaffordable and inaccessible alongside a negative impact on our long-term tax compliance culture. They will make it harder for people to access the tax advice they need, which means the wrong tax will be paid, costing both businesses and HMRC time as they try to resolve matters – taking their focus away from growth.

“Additionally, these proposals undermine a subsector which the Industrial Strategy and the PBS Sector Plan specifically highlight as a strength for the UK and an opportunity for overseas expansion. They undermine the prospects for growth when we need it more than ever, and we are calling on the government to revisit these plans.”

Overly burdensome

ICAEW said that as drafted, the legislation misses the target. On mandatory registration for all tax practitioners who interact with HMRC, ICAEW said the plans amounted to quasi regulation, as the eligibility criteria would allow for monitoring against a prescribed standard. It could also ban a firm from providing tax advice if just one of its partners was late in filing their own personal tax return. ICAEW called for mandatory registration to be deferred until April 2027 allowing time for more consultation.

ICAEW said that a lower bar to penalise tax advisers for any tax return where HMRC considers more tax is due, even if the adviser has not acted improperly, which would include penalties calculated by reference to potential lost tax revenue, could make tax advisers unlikely to take on clients with large tax liabilities such as large companies or High Net Worth Individuals, as they would consider the risk too high. In addition, the ability for HMRC to access confidential client papers via advisers where there is no dishonesty risks making the UK unattractive in the global market and could harm inward investment. Among other changes, ICAEW suggests that the legislation should be reframed to catch only actions that amount to misconduct by the tax adviser.

Meanwhile, the government also proposes making the failure to disclose a tax avoidance scheme a criminal offence. ICAEW said this area was unsuitable for criminal sanctions, not least because the disclosure hallmarks can catch straightforward tax planning and not just tax avoidance schemes, resulting in the potential for a criminal offence. This could lead to over-disclosure, negating the current effectiveness of the regime and could remove diversity and choice from the tax advice market if advisers exit due to the risks.

The Institute added that while it had previously supported HMRC's efforts to challenge the 20 to 30 people and organisations involved in promoting aggressive tax avoidance arrangements, the burden of many of the proposals would fall disproportionately on the 85,000 compliant tax advice firms.

ICAEW will continue to engage with government with the aim of ensuring that burdens on compliant agents are proportionate and supportive.

ENDS

Notes to editors:

1. ICAEW REP 71/25 Policy paper Proposals to close in on promoters of marketed tax avoidance
2. ICAEW REP 70/25 Policy paper Enhancing HMRCs powers: tackling tax adviser facilitated non-compliance
3. ICAEW REP 69/25 Policy paper Modernising and mandating tax adviser registration with HMRC