Context: Budget 2025-26 Measures
In Budget 2025 the UK government announced it will introduce enhanced powers and sanctions to tackle tax advisers who facilitate non-compliance, effective from 1 April 2026. Legislation will be included in the Finance Bill 2025-26. (gov.uk) Promoters of marketed tax avoidance will also face new restrictions. (gov.uk)
What This Means for Businesses & Entity Setups
If you're establishing or advising on entities—companies, LLPs, trusts—you’ll see the following effects:
Who is in the crosshairs?
- Tax advisers who design, promote, or arrange avoidance or non-compliant structures. These could include lawyers, accountants, advisory firms.
- Promoters of marketed tax avoidance schemes will face stricter oversight, tougher sanctions.
Sanctions & Liability Exposure
- Possible criminal or civil action against advisers who facilitate non-compliance. Might include fines, professional sanctions.
- New powers for HMRC to challenge arrangements more aggressively, demand disclosures, impose penalties more frequently.
- For clients: entities structured via advisers who promote or assist avoidance could face retrospective adjustments, higher taxes, interest, and possible penalties.
Implications for Structuring & Entity Set-ups
- When forming a company, trust, or other entity, ensure all tax advice comes from reputable, aligned advisors, and document advice properly.
- Avoid arrangements that rely on marketed avoidance promotions. If it looks aggressive or heavily reliant on loopholes, risks increase.
- Use conservative interpretation of favourable labeling: e.g., “efficient tax planning” vs “avoidance”. Ensure substance, documentation, and compliance with law.
Example: Setting up a Trust Structure
Suppose you wish to set up a trust holding multiple assets overseas. Under the new rules:
- If tax advisers promote structures that are partly artificial (e.g., trust distributions manipulated), they risk being sanctioned.
- Distributions or gains arising via such trusts will now be scrutinised under residence-based and arising basis tax regimes (FIG).
- Trustee or named adviser must ensure structure aligns with new non-dom rules and FIG law—mistakes can mean unexpected tax and sanctions.
Action Plan for Entity Setup Professionals
- Due diligence on advisers and promoters: Check their track record, credentials, whether advice is documented.
- Substance over form: Entities must have real business purpose, transparent management.
- Keep up to date with legislation: Finance Bill 2025-26 will contain details—review draft legislation when published.
- Review existing structures: Particularly those formed under older rules—see if any arrangements can be restructured before 1 April 2026 to reduce exposure.
Summary
The rules around adviser misconduct and promoter-facilitated avoidance are being tightened from 1 April 2026. For anyone setting up entities, this means playing it safe: use trusted advice, ensure substance, steer clear of aggressive tax avoidance promotions. This change raises both the stakes and the bar for compliance and responsible structuring.