HMRC Sanctionable Conduct – What Tax Advisers Need to Know

Since 1 April 2026 a regime has applied that allows HMRC to impose significant financial penalties on tax advisers for ‘sanctionable conduct”. The regime was introduced by Finance Act 2026 Schedule 22 which amended the provisions of Finance Act 2012 Schedule 38 which dealt with dishonest conduct by tax agents, now renamed HMRC sanctionable conduct and widened the scope of the regime from “tax agents” to “tax advisers”.

What is sanctionable conduct?

“Sanctionable conduct” occurs when a tax adviser intentionally seeks to facilitate a loss of tax revenue in the tax affairs of their clients. What does “a loss of tax revenue” mean in this context? HMRC says: “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.”:CH176540 [my emphasis in bold]

What is not sanctionable conduct?

According to HMRC at CH176520:

“Each case will turn on its own facts and on the quality of the available evidence from which an intention to bring about a loss of tax revenue may be found. In general, advisers who do any of the following will not be engaging in sanctionable conduct:

• Take a credible view of what the law requires, even where this might differ from HMRC’s own view
• Follow HMRC’s published guidance, even where as a matter of law the guidance proves to be incorrect
• Properly rely on a published extra-statutory concession
• Make a genuine mistake, error, or inaccuracy in their advice or in a document submitted to HMRC, even where the error may amount to a failure to take reasonable care”

What triggers “sanctionable conduct”?

Sanctionable conduct is triggered by a tax adviser intentionally bringing about a loss of tax revenue through causing a client to act unlawfully in respect of their tax affairs. This loss of tax could be caused by the client declaring too little tax, claiming too much tax relief, or claiming tax relief too early. HMRC say that the filing tax returns late by the client could also be sanctionable conduct but this is debateable given that the filing of a return late does not normally affect the due date of the tax payable.

What sanctions can HMRC apply?

HMRC can sanction a tax adviser as follows:

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

What kinds of advice are most at risk?

HMRC give two examples of obvious sanctionable conduct as follows:

• Claiming a tax repayment for a client who is not entitled to it.
• Submitting an incorrect tax return to HMRC on behalf of a client.

The requirement that the tax adviser has intentionally brought about loss of tax revenue will doubtless be the main battleground when HMRC alleges sanctionable conduct because the test is subjective. At CH176520 HMRC say:

“To have engaged in sanctionable conduct, the adviser must have foreseen that a loss of tax revenue could be a consequence of their actions. There must also be some sense in which the adviser can be said to have intended to bring about the foreseen consequence. The test is not met where the tax adviser did not intend to bring about a loss of tax, even if that was the consequence of their actions.”

This creates a high bar for HMRC because proving a subjective intention by the tax adviser to unlawfully bring about a loss of tax is normally quite a challenge given that very few, if any, tax advisers are going to admit to having set out unlawfully to cause a loss of tax. The burden of proof is on HMRC to establish such an intention and they say that the ordinary civil standard of proof applies i.e., more likely than not, however given that the penalties are treated as a criminal matter for human rights purposes it may be argued that the criminal standard of proof should apply i.e., are you sure beyond a reasonable doubt that the tax adviser intended to cause an unlawful loss of tax?

What does “reasonable care” mean in practice?

HMRC give the following examples of what taking reasonable care might look like:

• Take a credible view of what the law requires, even where this might differ from HMRC’s own view
• Follow HMRC’s published guidance, even where, as a matter of law, the guidance proves to be incorrect
• Properly rely on a published extra-statutory concession
• Make a genuine mistake, error, or inaccuracy in their advice or in a document submitted to HMRC, even where the error may amount to a failure to take reasonable care

Does losing a case automatically mean sanctionable conduct?

No not at all. The important thing is whether the tax adviser adopted a reasonable view of the relevant tax law and one that has a reasonable filing position that could reasonably be defended.

Can HMRC publicly name advisers?

Yes, HMRC have the power to publish the tax adviser’s details on GOV.UK where the adviser has been issued with a penalty form sanctionable conduct of more than the minimum of £7,500.

How can advisers protect themselves?

At the most basic level a tax adviser can best protect themselves from committing sanctionable conduct by taking a reasonable and realistic view of what the relevant tax law requires of their client, ideally backing that up with specialist legal advice from counsel (who has been put in possession of all the material facts) that supports the view being taken and, where appropriate, making a full disclosure to HMRC where a view is being taken that HMRC may disagree with or which does not follow HMRC’s published guidance.

Conclusion

“Sanctionable conduct” is yet another potential booby trap that tax advisers have to avoid when engaging with their clients and proposing solutions to tax issues facing clients that reduce the tax payable but do so in a manner that can reasonably be defended and that is not unlawful. On its face the sanctionable conduct regime looks dangerous and threatening but to the responsible and ethical tax adviser it should not be so because of the requirement for it to apply of dishonest intention and unlawfulness. On the other hand, those dodgy tax advisers who make a living by persuading clients to make questionable or downright dishonest filing positions or tax refund claims should be very concerned.