Legislation included in the Finance Bill 2025-26: 

• requires tax advisers interacting with HMRC to register with HMRC. HMRC may refuse or suspend registration where there are concerns about the firm’s conduct (cl220-246, Sch 19 and 20);
• extends the tax agent dishonest conduct regime by lowering the threshold for sanctions to “doing something with the intention of bringing about a loss of tax revenue” (cl247-250, Sch 21); and
• introduces a new strict liability criminal offence for promoting arrangements that have no reasonable prospect of success (cl156-162).  

In a briefing to MPs, ICAEW has warned that the measures are too widely drafted and could increase the cost and complexity of giving tax advice, harming taxpayers and mainstream professional firms in the process.  

Background 

ICAEW has engaged with the government previously on agent registration and the conduct of tax advisers. But, the extension of the prohibition of promoting tax avoidance arrangements described in clause 156(1)(a) has not been subject to public consultation.  

At the Autumn Budget 2025, the government confirmed that it would not take forward proposals to regulate tax advisers. ICAEW welcomed the announcement, having cautioned that any changes must be in the public interest in its response to a government consultation in 2024.  

Mandatory agent registration 

With effect from May 2026 and subject to a transition period of at least three months, tax advisers who interact with HMRC on behalf of their clients must register with HMRC. In order to register with HMRC, the tax adviser must first meet minimum standards, including the firm and its ‘relevant individuals’ being up to date with their own tax affairs and not have an anti-avoidance penalty imposed on them in the previous 12 months.  

Once registered, the agent must continue to meet those standards or face sanctions. These include having their registration suspended for up to 12 months where HMRC believes that the adviser’s behaviour “falls below the standards that might reasonably be expected of a tax adviser in their interactions with HMRC”. 

ICAEW believes that, for many firms, refusal or suspension of regulation could pose an existential threat to their business, preventing them from acting for thousands of compliant taxpayers and disrupting long-standing client relationships. ICAEW is concerned that: 

• there is no explicit test of proportionality or reasonableness before suspension is imposed; 
• HMRC officers are not restricted to HMRC’s standard for agents when considering the standards that are reasonably expected of tax advisers; and
• the regime has retrospective effect as historic mistakes that cannot be rectified could cause the registration conditions to not be met. Examples include a penalty charged under the disclosure of tax avoidance schemes (DOTAS) regime where the requirement to make a disclosure was overlooked.   

Further, ICAEW believes that the genuinely high-risk actors will remain outside the system as only advisers who interact directly with HMRC must register. ICAEW has called for the legislation to be amended so that registration cannot be refused or suspended where there has been a genuine mistake.  

Conduct of tax advisers 

At present, HMRC can impose penalties and other sanctions on tax advisers where it finds that the adviser has engaged in dishonest conduct (Sch 38, Finance Act 2012). Legislation included in Finance Bill 2025-26 replaces “dishonest conduct” with “sanctionable conduct”, which is defined as acting “with the intention of bringing about a loss of tax revenue”. This change will dramatically lower the threshold for penalties and accessing client files with effect from April 2026. Penalties are calculated by reference to potential lost revenue, capped at £1m for the first breach. 

ICAEW believes that the definition of sanctionable conduct is: 

• exceptionally broad;
• based on inferred intention; and
• not limited to unethical, unprofessional or unreasonable behaviour. 

This means 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. ICAEW believes that there should be a safeguard to protect ordinary professional judgement as, without this, every entry on a tax return and every piece of professional advice would have to be assessed against the risk of future HMRC challenge under these new agent provisions. 

Further, ICAEW has warned that the penalty framework could lead to the withdrawal of mainstream advisers from higher-risk work, weakening – not strengthening – overall tax compliance in the UK.  

New criminal offence 

The Finance Bill 2025-26 introduces a new strict liability criminal offence for promoting arrangements where there is “no realistic prospect that the arrangements will result in a tax advantage”. The new offence will take effect two months after the day on which the Bill receives Royal Assent. 

ICAEW believes that the new offence is drafted too widely with the result that, on a strict reading, honest mistakes could become criminal. Tax advice is complex and highly fact sensitive. Errors can arise from overlooking anti-avoidance provisions, incomplete or inaccurate client information and/or a misunderstanding of rapidly developing case law. Currently, these issues are addressed through professional standards, the imposition of civil penalties and advisers facing negligence claims. ICAEW believes that criminalising such conduct for the vast majority of tax agents would be disproportionate.  

Further, a penalty under these provisions could also lead to the loss of agent registration (see above), further escalating the risk. ICAEW has called for the legislation to be better targeted to make sure that mistakes cannot be in scope.  

Next steps 

The Finance Bill 2025-26 is currently making its way through Parliament and will become law once it has received Royal Asset. It is possible that changes will be made to the Bill as it progresses through Parliament. Further information on the Finance Bill 2025-26 can be found in TAXguide 05/25.  

ICAEW has called for the measures in the Bill relating to tax advisers to be amended to: 

• limit sanctions to unethical or unreasonable conduct;
• ensure criminal offences are properly targeted; and
• protect legitimate professional judgement and legal interpretation from triggering these provisions. 

Further, ICAEW believes that the implementation should be delayed until 2027 at the earliest, with the measures subject to further consultation and a clear impact assessment. 

ICAEW has previously been successful in convincing HMRC to change the mandatory registration requirement from that which was proposed in the draft legislation published in July. In the original draft, the firm had to register all partners of the firm providing tax services – regardless of whether they worked in tax. This would have been a huge administrative burden for firms, especially larger ones. The legislation included in the Finance Bill 2025-26 only requires up to five relevant individuals to be named.