As explained in an earlier article, a new concept of sanctionable conduct applies with effect from 1 April 2026. Under the new regime, HMRC can: 

• request access to a tax adviser’s files where it has “reasonable grounds” to suspect that the adviser has engaged in sanctionable conduct. If a document is found to contain an inaccuracy that was deliberate or careless, HMRC can charge a penalty of up to £3,000 for each inaccuracy; and 
• take action where it finds that sanctionable conduct has occurred. HMRC’s powers include charging penalties of between £7,500 and £1m for a first offence and publishing the tax adviser’s details on GOV.UK.  

In this article, we will explain what is, and is not ‘sanctionable conduct’, drawing on the legislation (Sch 38, Finance Act 2012, as amended by the Finance Act 2026), statements made by government ministers in Parliament and HMRC’s guidance on GOV.UK and in its Compliance Handbook. Note that HMRC intends to continue working on, improving, and adding to this technical guidance over the coming months. 

Sanctionable conduct 

Conduct is sanctionable if the person does something:  

• in the course of acting as a tax adviser; and
• with the intention of bringing about a loss of tax revenue.  

The legislation states that, “doing something includes omitting to do something”. 

It doesn’t matter if a loss is actually brought about or whether the adviser is acting on the instruction of clients. 

Acting as a tax adviser 

A broad definition of “tax adviser” applies for these purposes, encompassing organisations and individuals, whether based in the UK or overseas, who assist others with their tax affairs.  

HMRC has provided a non-exhaustive list of examples of tax advisers (CH176160). This includes businesses providing accountancy and tax services and individuals who run, are employed by, or provide services as a contractor to those businesses. It also includes legal professionals, valuers and employees of a bank where they are engaged in tax work.    

HMRC has provided examples of roles that would not be within scope of the sanctionable conduct rules. These include: 

• an in-house tax professional who files tax returns for their employer (or related businesses). If the employee’s actions lead to a loss of tax in relation to the business, HMRC would consider charging inaccuracy penalties on that business; and
• a person who helps family members or friends with their tax affairs, unless this is done in the course of their business.  

A loss of tax revenue 

This definition is unchanged from the former dishonest tax agents rules. A loss of tax revenue is brought about where the client:  

• accounts:
  • for less tax than they are required to account for by law; or
  • for tax later than they are required to account for it by law; or
• obtains:
• more tax relief than they are entitled to obtain by law; or
• tax relief earlier than they are entitled to obtain it by law. 

In its guidance (CH176540), HMRC summarises the position as follows (emphasis added):  “In other words, bringing about a loss of tax revenue means causing a client to act unlawfully in respect of their tax affairs. This may be by declaring too little tax, filing tax returns late, claiming too much tax relief, or claiming tax relief early.” 

ICAEW questions whether the late filing of a return falls within the definition of bringing about a loss of tax, and points to a government document published prior to the definition being introduced which refers to “gaining a timing advantage”. As filing a tax return late does not change the due date for paying the tax, there is no timing advantage. The taxpayer is accounting for the tax in the correct return even if the return is filed late.   

In an example at CH176520, HMRC says that there is no sanctionable conduct where a tax return is filed late and the adviser “actively tried to prevent a tax loss by making sure the client was aware of the deadline for submitting the return and the consequences of submitting a return late”. 

Intention 

Perhaps the most challenging aspect of establishing if a person has engaged in sanctionable conduct is determining the person’s intention. In its guidance (CH176520), HMRC explains that: 

• the test is subjective and each case will turn on its own facts; 
• in applying the test, HMRC will consider “the adviser’s knowledge and actions at the time they acted”; and 
• the burden of proof is on HMRC. HMRC believes that the ordinary civil standard applies, (ie, that it is more likely than not (over 50%) that the person intended to bring about a loss of tax revenue). 

Examples are provided to illustrate how HMRC expects to apply the rules in certain circumstances.

Genuine mistakes 

HMRC says that the new concept of sanctionable conduct has been introduced to tackle the “small number of tax advisers” who “intentionally seek to facilitate a loss of tax revenue in the tax affairs of their clients” (CH176120). ICAEW has expressed concern that the legislation is too widely drafted and has the potential to go beyond this, impacting on mainstream tax advisers.  

In statements made to the House of Commons as part of its scrutiny of the changes, Dan Tomlinson MP, the Exchequer Secretary to the Treasury, said that the measures were not intended to “affect advisers who make mistakes while trying, as the vast majority do, to do the right thing”. This is reflected to some extent in HMRC’s guidance (see above). ICAEW will continue to work with the government and HMRC to ensure that the legislation works as intended.