In Representation 35/25, ICAEW’s Tax Faculty has responded to the government’s consultation on enhancing HMRC's ability to tackle tax advisers facilitating non-compliance. The consultation was launched alongside the Spring Statement on 26 March 2025.

The government’s proposed changes expand and strengthen HMRC's powers to investigate and sanction tax advisers. The consultation indicates that HMRC would apply the proposed new and amended powers where it suspects that the adviser’s actions have led to an inaccuracy in a taxpayer’s return or other document. The measures are explained in detail in an earlier article.

ICAEW’s view

ICAEW supports reasonable, properly targeted and proportionate measures to tackle poor tax advice and/or non-compliance facilitated by tax agents. However, it does not believe that the proposed changes meet these criteria and that they would consequently be contrary to the public interest. 

In particular, ICAEW is concerned that the measures:

• are disproportionate and poorly targeted; 
• risk creating a quasi-regulatory environment; and
• could negatively impact the UK’s tax market. 

ICAEW believes that a range of powers that reflect the nature of the non-compliance, with relevant safeguards, might be more appropriate. As an improvement regulator, ICAEW welcomes measures to broaden the disclosure of HMRC’s concerns about tax advisers to professional bodies. 

Disproportionate and poorly targeted

ICAEW's main concern is that the measures proposed in the consultation document could be applied too widely and are not appropriately targeted at advisers who are deliberately complicit in non-compliance. 

The starting point for the new proposals is the dishonest conduct provisions in schedule 38, Finance Act 2012  However, the dishonest conduct rules were created for a different purpose. Adapting these rules will result in draconian provisions applying to behaviours that fall well short of dishonest conduct.

It is important that any new or enhanced powers are sufficiently targeted and drafted in legislation. If this is not the case, there is a risk that HMRC will come under pressure to use its powers more widely in the future. The term ‘non-compliance’ should be clearly defined, for example, tax advisers actively (and knowingly) facilitating and promoting non-compliance that results in a loss of tax. Defining the target is key to minimising the impact of the measures on compliant advisers.

Given HMRC’s endorsement of Professional Conduct in Relation to Taxation (PCRT), and the alignment of its standard for agents with PCRT, ICAEW hopes that HMRC agrees that a tax adviser that complies with PCRT and the HMRC standard should never be subject to these new powers.

Regulatory environment

ICAEW believes that these measures risk creating a quasi-regulatory environment. This would see HMRC acting as the de facto regulator, but with none of the safeguards needed to protect the vast majority of ordinary compliant tax agents seeking to ensure that their clients pay the right amount of tax.

HMRC has a clear conflict of interest in acting as a de facto regulator of tax advisers and agents. Giving HMRC disproportionate powers like those proposed in this consultation could further erode the trust that taxpayers and advisers have in the tax system.

Impact on the tax market

ICAEW is concerned that the proposals could adversely impact the operation of the UK tax market and make it harder for taxpayers to obtain tax advice from a reputable tax adviser at a reasonable price. There is a risk that the measures will require mainstream tax advisers to significantly change their governance procedures.

Some compliant tax advisers may even exit aspects of the tax advice and compliance market. This could lead to increased costs for taxpayers and reduced access to services, potentially slowing down transactions and decision-making and hindering growth. In addition, it could put more pressure on HMRC at a time when it is struggling to improve its own performance. There is a risk that the proposals might reduce compliance and increase the tax gap.

Other concerns

The consultation was open for just six weeks and coincided with two bank holidays and the Easter holiday period. ICAEW has cautioned that this may have left insufficient time for all respondents to consider the consultation, reducing stakeholder engagement.

ICAEW supports evidence-based policymaking and the need for high-quality data to support decision-making. However, no data has been provided on:

• the amount of tax lost to advisers facilitating non-compliance; or
• the number of advisers engaged in such activities who are affiliated to a professional body, as opposed to advisers who are not subject to any professional body oversight.

ICAEW has also questioned whether the proposals solve any of the following problems:

• advisers who continue to provide tax advice despite being excluded from membership by their professional body or penalised by HMRC;
• advisers who are difficult to identify because they do not interact directly with HMRC;
• advisers not established in the UK; or
• advisers who phoenix into a new business.