---
title: "HMRC’s New Powers Over Tax Advisers: What They Mean for Your Firm"
url: https://taxdisputes.co.uk/2026/11/hmrcs-new-sanctionable-conduct-powers-over-tax-advisers/
date: 2026-11-02
modified: 2026-11-02
lang: en
author: "Tax Dispute Solicitors"
description: "If you advise anyone on their tax, HMRC can now determine that your firm has engaged in “sanctionable conduct”, demand your client files without first asking the tribunal, serve a conduct notice and assess a penalty of at least £7,500, subject only to a special reduction. A person engages in sanctionable conduct if, in the course of acting as a tax adviser, they do something with the intention of bringing about a loss of tax revenue, and omitting to act counts as acting. The rules apply to acts and omissions on or after 1 April 2026, and the best time to take legal advice is when the first letter arrives, before any reply goes out."
categories:
  - "Compliance"
  - "Disclosure"
  - "HMRC Penalty"
  - "Legal Insights"
  - "News"
  - "Tax Investigation"
  - "Voluntary Disclosure"
tags:
  - "accountants and HMRC"
  - "conduct notice"
  - "file access notice"
  - "Finance Act 2026"
  - "hmrc penalty"
  - "HMRC powers"
  - "HMRC Tax Investigation"
  - "legal professional privilege"
  - "paragraph 26 Schedule 38"
  - "paragraph 28 Schedule 38"
  - "paragraph 3 Schedule 38"
  - "paragraph 7 Schedule 38"
  - "sanctionable conduct"
  - "Schedule 22 FA 2026"
  - "Schedule 38 FA 2012"
  - "section 250 FA 2026"
  - "tax adviser penalty"
  - "tax advisers"
image: https://taxdisputes.co.uk/wp-content/uploads/2026/11/HMRC-Tax-Adviser-Workspace-1024x683.png
word_count: 2733
---

# HMRC’s New Powers Over Tax Advisers: What They Mean for Your Firm

**If you advise anyone on their tax, HMRC can now determine that your firm has engaged in “sanctionable conduct”, demand your client files without first asking the tribunal, serve a conduct notice and assess a penalty of at least £7,500, subject only to a special reduction. A person engages in sanctionable conduct if, in the course of acting as a tax adviser, they do something with the intention of bringing about a loss of tax revenue, and omitting to act counts as acting. The rules apply to acts and omissions on or after 1 April 2026, and the best time to take legal advice is when the first letter arrives, before any reply goes out.**

The people reading this are accountancy principals, bookkeepers and payroll bureaux who want to know whether HMRC’s new powers apply to them, and clients whose adviser has just received a letter. The surprise is that the word “dishonest” has gone from the statute, and the separate appeal against HMRC’s determination has gone with it. HMRC now needs only reasonable grounds to suspect before it asks for your files, and the test it applies is intention.

### Want legal advice from Tax Solicitors on your case?
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## What HMRC Can Now Do to Your Firm

Schedule 22 amends Schedule 38 to the Finance Act 2012, which used to be headed “Tax agents: dishonest conduct” and is now headed “Tax advisers: sanctionable conduct” (paragraph 2 of Schedule 22). Section 250(2) of the Finance Act 2026 provides that “Schedule 22 comes into force on 1 April 2026 and has effect in relation to acts or omissions on or after that date”. On those words, earlier work stays under the old text, subject to any regulations under section 250(3). If a letter has already reached you, our page on [HMRC tax investigations](https://taxdisputes.co.uk/hmrc-tax-investigations-solicitors-london/) shows how we handle the enquiry that follows.

The process is short. HMRC determines that a person “is engaging in or has engaged in sanctionable conduct”, and an authorised officer “may notify the person of the determination”, stating the grounds (new paragraph 25B). A Part 4 penalty can be assessed only if a conduct notice “has been given to the person and not withdrawn” (paragraph 29(2)). Part 2 of the old Schedule, which held the appeal against the determination, is omitted by paragraph 6 of Schedule 22. Our page on [HMRC penalties](https://taxdisputes.co.uk/hmrc-penalties/) sets out the penalty regimes behind Part 4.

## Does This Apply to You?

Paragraph 2(1) of the amended Schedule catches an organisation that, “in the course of a business carried on by it, assists other persons with their tax affairs”, and an individual who does the same in the course of a business. Paragraph 2(2) lists four ways of assisting, from giving tax advice and acting as agent to helping with documents HMRC is likely to rely on. If your work looks like any of them, speak to [tax solicitors](https://taxdisputes.co.uk/tax-solicitors/) before an enquiry starts rather than after.

The definition names no profession, so a bookkeeper, a payroll bureau or a law firm doing those things falls within its words. Paragraph 2(3) also covers a person who is “appointed indirectly (for example, at the request of someone other than their client)”. A firm can be the subject of a determination as well as an individual, because paragraph 3(1) speaks of a “person”. We act in these disputes through our [tax litigation practice](https://lexlaw.co.uk/practice-areas/taxation-solicitors-london/).

## What “Intention” Means for Your Everyday Work

The operative words are in paragraph 3(1): a person “engages in sanctionable conduct” if, “in the course of acting as a tax adviser, the person does something with the intention of bringing about a loss of tax revenue”. Paragraph 3(7) provides that “doing something includes omitting to do something”, and paragraph 3(2) says “It does not matter whether a loss is actually brought about” and paragraph 3(3) adds: “Nor does it matter whether the person is acting on the instruction of clients.” A client’s insistence does not take your conduct outside the test. Our guide to [HMRC behaviour assessments](https://taxdisputes.co.uk/2026/01/hmrc-behaviour-assessments-careless-deliberate-or-concealed/) shows how HMRC reasons about intention in ordinary taxpayer cases.

Paragraph 3(4) defines a loss of tax revenue as clients accounting for less tax than the law requires, obtaining excessive relief, accounting for tax later than required, or obtaining relief earlier than they should. Timing alone is enough, and a loss counts “despite the fact that the loss can be recovered or properly accounted for” (paragraph 40). Nothing in paragraph 3(1) mentions carelessness or recklessness, so an honest mistake does not meet it. How the file looks to an officer reading it later is another matter, and our [voluntary disclosure guide](https://taxdisputes.co.uk/2026/02/voluntary-disclosure-2026-guide/) covers putting things right early.

## The First Letter: What a File Access Notice Demands

A file access notice requires you to provide “relevant documents”. Paragraph 9(1) defines these as your working papers “(whenever acting as a tax adviser) 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”. Ownership is irrelevant (paragraph 9(2)), and former clients count (paragraph 9(3)(a)). Ordinary information powers differ, as our note on [Schedule 36 notices](https://taxdisputes.co.uk/2026/03/schedule-36-notices-explained-your-rights-and-obligations/) explains.

The trigger is “case A”: an authorised officer “has reasonable grounds to suspect that a person is engaging in, or has engaged in, sanctionable conduct” (paragraph 7(2)). A case A notice can cover only clients about whom the officer has those grounds, and it “must identify the clients”, which may be done “by reference to a class or description of clients” (paragraph 10(1A) and (1B)). Old documents fall outside a notice after 20 years (paragraph 16). Before you hand anything over, our guide to [HMRC information requests](https://taxdisputes.co.uk/2026/09/hmrc-information-requests-and-how-much-you-must-disclose/) explains how far disclosure should go.

## Privilege: What You Can and Cannot Protect

Paragraph 17(1) provides that a file access notice “does not require the document-holder to provide any part of a document that is privileged”, and paragraph 17(2) treats a document as privileged where “a claim to legal professional privilege” could be maintained in legal proceedings. Our page on [what the law treats as privileged in disclosure](https://lexlaw.co.uk/duty-disclosure-litigation-court-documents-confidentiality-privilege-cpr-legal-advice/) sets out the categories.

Legal advice privilege does not extend to communications with an accountant, and litigation privilege protects an accountant’s reports only if prepared for the sole or dominant purpose of litigation, as our note on [accountants’ reports and litigation privilege](https://taxdisputes.co.uk/2020/10/high-court-re-confirms-accountant-consultant-reports-are-not-protected-by-litigation-legal-privilege-disclosure-hmrc-advice/) explains. A frank conversation with another accountant about the notice may therefore be something HMRC can ask for. [Legally privileged advice from our tax litigators](https://taxdisputes.co.uk/expert-advice/) about the notice itself is protected, which is the practical reason to call a lawyer first.

## No Tribunal Gate, and 30 Days to Appeal

For anyone other than a tax adviser, paragraph 7(1) still makes the power exercisable “only with the approval of the tribunal”. For you, paragraph 7(1A) says only that an officer “may ask for the approval of the tribunal”. If HMRC does ask, paragraph 13(1) requires the tribunal to be satisfied that the case falls within case A or case B and that the officer is justified, and that those affected have been “given a reasonable opportunity to make representations”. Its decision is final (paragraph 13(3)). You get a hearing before the notice only if HMRC chooses to seek one, which is why our [tax appeals practice](https://taxdisputes.co.uk/hmrc-tax-appeals-solicitors-london/) matters from day one.

If approval was not obtained, paragraph 20(1A) allows you to “appeal against the file access notice or any requirement in it”, by notice to the officer within 30 days beginning with the day the notice was given (paragraph 20(2)). The tribunal “may confirm, vary or set aside” the notice or a requirement, and its decision is final (paragraph 20(4) and (6)). Our [First-tier Tax Tribunal solicitors](https://taxdisputes.co.uk/first-tier-tax-tribunal-solicitors-london/) appear in the usual forum.

## The First Week: What We Would Do With You

We would first diarise the 30-day date and secure your records, and our [tax investigation solicitors](https://taxdisputes.co.uk/hmrc-tax-investigations-solicitors-london/) do that on day one. Concealing or destroying a required document counts as a failure to comply (paragraph 22(2)) and is an offence carrying up to two years’ imprisonment on indictment (paragraph 21(5)), so nothing should be deleted, tidied or re-dated. We would then read the notice for its grounds, the clients it names and the documents it asks for, and decide whether to appeal, narrow the request or comply in stages.

We would also take control of the conversation with HMRC. Anything you say to an officer goes on the file, and a casual explanation of why a position was taken can be read as intention. Our page on [HMRC interviews](https://taxdisputes.co.uk/hmrc-interviews/) explains interviews under the Police and Criminal Evidence Act 1984, and our guide to [challenging a Schedule 36 penalty](https://taxdisputes.co.uk/2026/10/how-to-challenge-an-hmrc-schedule-36-penalty/) shows how we approach penalties for ordinary information notices.

## What a Penalty Could Cost Your Firm

Under paragraph 26(2), where potential lost revenue is attributable to the conduct, the penalty is the appropriate percentage of it or, “if higher, £7,500”; otherwise it is £7,500. The appropriate percentage is 70% (paragraph 26(4)(a)), and the amount is capped at £1,000,000 (paragraph 26(3)), before the repeat-penalty rules apply. Our [HMRC penalties](https://taxdisputes.co.uk/hmrc-penalties/) page covers the ordinary regimes these amounts are measured against.

Disclosure can bring the percentage down. HMRC “must reduce” the 70% to reflect the quality of a disclosure, but never below 35% for a prompted disclosure or 20% for an unprompted one (paragraph 26(5) and (6)), and a disclosure is unprompted only if the person “has no reason to believe that HMRC have discovered or are about to discover” the conduct (paragraph 26A(2)). On the wording of paragraph 26(2), a lower percentage does not displace the £7,500 minimum. Repeat assessments within 20 years raise the percentage to 85% and then 100% (paragraph 26B). HMRC may also reduce, stay or compromise a penalty for “special circumstances”, which cannot include ability to pay (paragraph 27(3)(a)), and we run those arguments in our [HMRC tax penalty appeals](https://lexlaw.co.uk/hmrc-tax-penalty-appeal-solicitor-london/).

## Your Name in Public, and the Cost of Ignoring a Notice

Paragraph 28(1) provides: “The Commissioners must publish information about a person if the person incurs a penalty under paragraph 26 of more than £7,500.” A penalty of exactly £7,500 is outside the duty. Paragraph 28(2) lists what may be published, including name, postcode and penalty amount, and HMRC may publish about an organisation too after giving it a reasonable opportunity to make representations (paragraph 28(5) and (6)). A final paragraph 26 penalty is also a threshold condition under paragraph 4 of Schedule 34 to the Finance Act 2014 (promoters of tax avoidance schemes), as substituted by paragraph 37 of Schedule 22. For a practice that lives on its reputation, that is why we treat the appeal as urgent; see our [tax solicitors](https://taxdisputes.co.uk/tax-solicitors/) page.

Ignoring a notice is the most expensive choice. Failing to comply carries a penalty of £300 (paragraph 22(1)) and a further penalty of up to £60 a day (paragraph 23), and a document with a deliberate or careless inaccuracy attracts up to £3,000 for each inaccuracy (paragraph 25A). If you do not appeal a penalty, you must pay it within 30 days of notification (paragraph 32(1)), and our [HMRC penalties](https://taxdisputes.co.uk/hmrc-penalties/) page explains how those sums add up in the ordinary regimes.

## When It Is Your Adviser Under Investigation

Many people searching for HMRC’s powers are really asking whether bad advice has consequences. Sanctionable conduct needs an intention to bring about a loss of tax revenue (paragraph 3(1)), and advice that was careless, even seriously so, does not meet those words. Careless advice that costs a client money belongs to professional negligence, as our pages on [negligent tax advisers](https://professionalnegligenceclaimsolicitors.co.uk/bad-hmrc-finance-advice-sue-advisor/) and [negligent accountants](https://professionalnegligenceclaimsolicitors.co.uk/compensation-negligent-accountants-financial-tax-advisors/) explain.

The two regimes run separately: a conduct notice does not itself decide whether a client has a negligence claim, and a client can have one where none has been served. A client whose adviser failed to warn about a liability can read [accountants who fail to warn about a tax liability](https://professionalnegligenceclaimsolicitors.co.uk/accountant-failed-to-warn-about-tax-liability-can-i-claim/), and, on time limits, our page on [limitation in professional negligence claims](https://professionalnegligenceclaimsolicitors.co.uk/limitation-period-in-professional-negligence-claims/) explains. If the firm cannot pay, our page on [claims against an insolvent professional’s insurer](https://professionalnegligenceclaimsolicitors.co.uk/insolvent-professional-claim-against-their-insurer/) explains when the insurance can be reached.

## The Clocks, and What Happens to an Unpaid Penalty

Three 30-day periods matter to you: the appeal against a file access notice that the tribunal did not approve (paragraph 20(2)), the appeal against a penalty (paragraph 31(2)) and payment (paragraph 32(1)). HMRC is on a clock too. A conduct notice is treated as withdrawn if HMRC has not assessed a Part 4 penalty by the applicable deadline (paragraph 25C(3)), which is 12 months from the later of the first day HMRC may assess and “day X” (paragraph 30(3)). We track both clocks from the day a notice arrives, and our [guide to appealing a Schedule 36 penalty](https://taxdisputes.co.uk/2026/10/how-to-challenge-an-hmrc-schedule-36-penalty/) shows how a 30-day appeal is put together.

A penalty “may be enforced as if it were income tax charged in an assessment and due and payable” (paragraph 32(2)), so for a corporate adviser an unpaid penalty points towards statutory demands and winding-up petitions. Our pages on [setting aside a statutory demand](https://windinguppetitionsolicitors.co.uk/statutory-demand-set-aside-lawyers-london-hmrc/), [opposing a winding-up petition](https://windinguppetitionsolicitors.co.uk/opposing-a-winding-up-petition/) and the [step-by-step guide for directors responding to an HMRC petition](https://windinguppetitionsolicitors.co.uk/step-by-step-guide-for-directors-responding-to-a-hmrc-winding-up-petition/) deal with those steps.

## How LEXLAW Can Help

We advise tax advisers, accountants, bookkeepers and their clients on conduct notices, file access notices, penalty appeals and any civil or criminal investigation that runs alongside them. We do not prepare returns or accounts, which remain accountants’ work, and we do not offer free legal advice or legal aid. We generally take on substantial matters only, on the terms on our [funding page](https://taxdisputes.co.uk/funding/).

We are dual-qualified solicitors and barristers with chambers in Middle Temple next to the Royal Courts of Justice. We offer a fixed fee advice conference with both a solicitor and a barrister, so you hear how to respond to the notice and how the appeal would look before the 30 days run out. You can start by completing our [case assessment form](https://taxdisputes.co.uk/legal-case-assessment/).

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### FAQs

**Does this apply to my firm if I only do bookkeeping?**
It can. Paragraph 2 names no profession and covers anyone who, in the course of a business, assists others with their tax affairs, including by helping with documents HMRC is likely to rely on. Whether your work falls within it depends on what you actually do for clients.

Can HMRC demand my files without the tribunal’s approval?
Yes. Paragraph 7(1A) says an officer “may ask for the approval of the tribunal” where the person is a tax adviser, so approval is optional, but the officer needs reasonable grounds to suspect sanctionable conduct (paragraph 7(2)). Without approval, you can appeal within 30 days (paragraph 20(1A) and (2)).

Should I reply to HMRC myself?
You can, but anything you say goes on HMRC’s file. Privilege covers communications with a lawyer made to obtain legal advice and does not cover those with an accountant, so taking legal advice first protects that advice. The 30-day appeal period runs from the day the notice was given (paragraph 20(2)).

Is a careless mistake sanctionable conduct?
No. Paragraph 3(1) requires an intention to bring about a loss of tax revenue and says nothing of carelessness or recklessness. A careless mistake can still raise other issues, including a client’s negligence claim.

What are the minimum and maximum penalties for sanctionable conduct?
Under paragraph 26 the penalty is 70% of the potential lost revenue or £7,500 if higher, and £7,500 where no revenue is attributable, capped at £1,000,000. Paragraph 26B raises this to 85% and £5,000,000 for repeat cases, and to 100% with no cap on six or more assessments within 20 years.

Can a sanctionable conduct penalty be reduced?
Yes. HMRC must reduce the 70% to reflect the quality of any disclosure, but not below 35% for a prompted disclosure or 20% for an unprompted one (paragraph 26(5) and (6)). It may also reduce, stay or compromise the penalty for special circumstances, which exclude ability to pay (paragraph 27).

Will HMRC publish my firm’s name?
HMRC must publish information about a person who incurs a paragraph 26 penalty of more than £7,500, which may include the name, postcode and penalty amount (paragraph 28(1) and (2)). An organisation must have a reasonable opportunity to make representations first (paragraph 28(6)).

Should I tell my professional indemnity insurer?
Policies differ, and many require notice of circumstances that may lead to a claim. Read the notification clause in yours and take advice on timing before you reply to HMRC.