2026/27 looks set to be a particularly challenging year for agents as they digest and respond to significant changes to the tax system affecting both their clients and their own businesses. The focus in this article is on the new concept of sanctionable conduct, applying from 1 April 2026. An earlier article explains the latest position with regard to mandatory agent registration with HMRC.  

For articles on the changes affecting taxpayers, see Prepare for 2026/27 | ICAEW.  

Background 

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 the Finance Act 2026 (s250 and Sch 22) replaces “dishonest conduct” with “sanctionable conduct”, lowering the threshold for HMRC to access an adviser’s client files and then potentially charge penalties. The changes have effect in relation to acts or omissions on or after 1 April 2026.  

HMRC has published initial high-level guidance that provides an overview of the changes. HMRC will publish detailed technical guidance in due course. 

Scope 

A person engages in “sanctionable conduct” if, in the course of acting as a tax adviser, they do something, or omit to do something, with the intention of bringing about a loss of tax revenue. That person may be an organisation or an individual (eg, sole practitioner or employee).  

The term “tax adviser” includes an organisation or an individual that assists a person with their tax affairs in specific circumstances, including advising that person on, or acting as their agent in relation to, tax. It even extends to providing assistance for non-tax purposes if the assistance is provided in the knowledge that it will be, or is likely to be, used by the taxpayer in connection with their tax affairs. 

As can be seen, these terms are defined quite broadly. ICAEW has raised concerns that the legislation is drafted too widely with the result that 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.  

Some comfort was provided during the Finance Bill 2025-26 debates, with Dan Tomlinson MP, the Exchequer Secretary to the Treasury (XST), stating that the changes to the rules “will not affect advisers who act in good faith, or who take a credible view as to what the law requires of their clients”. Further details are provided in an earlier article.  

ICAEW hopes that the scope of the regime will be made clear in HMRC’s detailed technical guidance, and is working with HMRC to achieve this. 

Access to files 

Where HMRC has “reasonable grounds” to suspect that a tax adviser is, or has been engaged in sanctionable conduct, it can issue the adviser with a file access notice, requesting access to “relevant documents”. 

It is not yet clear what will and will not constitute “reasonable grounds” for this purpose. The term “relevant documents” is defined in the legislation and means the adviser’s “working papers (whenever acting as a tax agent) and any other documents received, created, prepared or used by the tax adviser for the purposes of, or in the course of, assisting clients with their tax affairs”. Documents relating to both current and former clients of the adviser are within scope.  

A file access notice can only apply to a document that is in the holder’s possession or power. The document holder does not have to provide:  

• parts of a document relating to the conduct of a pending appeal relating to tax;
• journalistic material; 
• personal records;
• documents dating from 20 years before the notice date; or
• privileged communications.  

There are fixed and daily penalties for failing to comply with a file access note. Further, penalties of up to £3,000 may be charged for each inaccuracy found in the documents.  

Penalties for sanctionable conduct 

If HMRC determines that the adviser has engaged in sanctionable conduct, it will issue them with a conduct notice. The notice sets out HMRC’s assessment of the adviser’s conduct and warns them to expect a financial penalty. HMRC’s guidance says that the adviser will have the opportunity to provide evidence to dispute the assessment. However, no further information is provided as to how this is expected to work.  

HMRC will calculate the penalty based on the potential lost revenue due to the sanctionable conduct. The penalty will be increased where the adviser has incurred such penalties previously and may be reduced depending on if, and to what extent, the adviser helped HMRC to identify and determine the extent of the sanctionable conduct.  

The minimum amount of the penalty is £7,500 and the maximum amount is £1m for a first offence (unlimited where penalties have been charged on six or more occasions).  

Another area of uncertainty is whether, given that the rules can apply to organisations and individuals, HMRC will seek to impose penalties for one instance of sanctionable conduct multiple times. ICAEW has raised this with HMRC and asked that clarification is given in HMRC’s detailed guidance.   

Power to publish information 

Where a penalty of more than £7,500 is charged, HMRC will publish the tax adviser’s details on GOV.UK, having informed the adviser in advance. The Finance Act 2026 (s251-254) also gives HMRC the discretion to exercise this power in other circumstances, including where HMRC has made the decision to suspend the adviser’s access to its online agent services. HMRC’s guidance provides further details, including what information will/may be published.