What Changed
On 1 April 2026, HMRC enhanced its enforcement powers regarding tax advisers engaging in sanctionable conduct, which refers to acts intentionally aimed at losing revenue for HMRC. Activities like knowingly filing incorrect returns or falsely claiming repayments are now met with stronger penalties. (gov.uk)
Defining Sanctionable Conduct
Key examples include:
- Claiming repayments a client is not entitled to.
- Submitting returns that include deliberate or careless inaccuracies.
- Failing to notify HMRC about tax that’s due.
These go beyond honest mistakes—intent is vital. HMRC defines sanctionable conduct as intentional wrongdoing. (gov.uk)
Penalties Structure
The penalty depends on the Potential Lost Revenue (PLR) from the conduct:
- First offence: up to 70% of PLR, capped at £1 million.
- Multiple offences (2–5): up to 85% of PLR, cap increased to £5 million.
- Six or more offences: 100% of PLR, no specific monetary cap.
If PLR can't be determined, a minimum fine of £7,500 applies. (gov.uk)
If HMRC charges you more than £7,500, your details—name, postcode, the nature of business, offending periods—can be published on GOV.UK. (gov.uk)
What Counts as Sanctionable Conduct & Timeline
Conduct that occurs on or after 1 April 2026 can be penalised under the new rules. HMRC may request data, documents or audit files even if some relate to periods before this date, provided the conduct in question arises after the effective date. (gov.uk)
Compliance Strategies
- Ensure robust client documentation: Keep clear records of advice given, assumptions made, and information supplied.
- Internal review and peer checks: Ensure returns and claims undergo independent review to identify potential inaccuracies.
- Error reporting and mitigation: If mistakes are found, inform HMRC. Prompt corrections may reduce penalties.
- Training & awareness: Stay updated on what is negligent vs deliberate—it’s the difference between a mistake and sanctionable conduct.
Example Practice Scenario
Sarah is a tax adviser helping a UK landlord claim expense deductions. She has full expense documents but includes an expense that she knows is not allowable because similar cases were denied. HMRC detects this during compliance review and treats this as sanctionable conduct.
- PLR: £10,000
- As first offence, Sarah could face penalty up to 70% of £10,000 = £7,000.
- If similar conduct is detected again within four years, future penalties could escalate.
Takeaways
- The rules post-1 April 2026 are stricter—intent and knowledge of wrongdoing are central.
- Advisers must take an evidence-based, cautious approach when preparing returns.
- Maintaining excellent contemporaneous records and overt client communication is now more critical than ever.