I was in the middle of an R&D borderline call on Thursday when the ICAEW announcement landed. The client wanted to claim software development costs I thought were probably qualifying, but sat close enough to the HMRC guidance boundary that a sceptical reviewer could push back. My usual file note read "marginal call, recommending claim with enhanced documentation, explained enquiry risk to the client." Adequate under the old rules. Not quite adequate under what starts on 1 July.
The new ICAEW Code of Ethics, approved by Council on 14 April 2026, takes effect 1 July 2026 and introduces what most of us will call the "credible basis" test (ICAEW, 2026). Before recommending a tax planning position, I need to have identified a credible basis in laws, regulations, case law, or tax authority guidance - and to have written it down.
TL;DR: From 1 July 2026, ICAEW members recommending tax planning must document a credible basis in legislation, case law, or HMRC guidance before advising. I'm ACCA, but PCRT already adopted the same test in January 2026 via IESBA alignment - so the rule has been live for me for four months. The pinch is in grey-zone advice, not aggressive planning.
What is the "credible basis" test actually asking me to do?
It's asking me to show my working. Before I advise on a tax planning arrangement, I need to point to one of: the relevant tax legislation, legislative proceedings discussing intent, court decisions, professional or industry journals, tax authority rulings or guidance, or an established practice the relevant tax authority has not challenged (ICAEW Code of Ethics 2026).
Then there's the "stand back" requirement. Once I've identified the technical basis, I'm expected to pause and consider the reputational, commercial, and wider economic consequences of the arrangement, beyond whether it technically works (IESBA, 2024). If I can't tick both boxes, I shouldn't be recommending it.
The documentation piece is where it gets practical. ICAEW says members are "encouraged to document, on a timely basis" their analysis - nature and purpose, ultimate beneficiaries, areas of uncertainty, judgements made, and courses of action considered. "Encouraged" is the word on the page. In practice, if a regulator ever asks, an undocumented credible basis is no credible basis.
Am I bound by this even though I'm ACCA, not ICAEW?
Yes, and that's the point most coverage is missing. The ICAEW code is getting the headlines because it's the one that changed on 14 April. But the substantive test has been live for ACCA members since PCRT was updated on 1 January 2026, and before that since the IESBA international standard became effective on 1 July 2025 (ACCA, 2025).
PCRT - Professional Conduct in Relation to Taxation - is produced by seven UK bodies including ACCA, ICAEW, CIOT, ICAS, AAT, STEP, and ATT. The January 2026 PCRT update added new paragraphs 3.8 to 3.10 setting out what a member should do where they disagree that a tax planning arrangement has a credible basis (ICAEW, 2025). Same language, same test.
When I heard about the ICAEW change my reaction was "I already live under this, and have been adjusting for four months." The ICAEW update means ICAEW firms catch up with what PCRT-bound practitioners were doing from the start of the year.
Where is this going to hurt? (It's the grey-zone work)
Not the aggressive end. Anyone sensible stopped writing opinions on marketed schemes a decade ago, and credible basis changes nothing for that population - they were never going to get one in case law anyway.
The pinch is in ordinary advisory work where I routinely write phrases like "HMRC's position is arguable but in our view this qualifies." Specifically:
- R&D claims where software development sits close to the HMRC CIRD80150 boundary. SME claims fell 31% year-on-year in 2024-25 and 16,000 fewer companies claimed than the previous cycle, largely because HMRC enquiry activity climbed sharply (HMRC, September 2025).
- SEIS advance assurance applications. HMRC approved 85% of 3,195 applications in 2024-25, meaning roughly 490 didn't get through (HMRC, May 2025).
- Employment-status calls on contractor arrangements, particularly where a CEST result and a practitioner's professional view diverge.
- Directors' loan account manoeuvres near a year-end where the commercial purpose is thin.
On all of these, I already had a view, usually defensible. I just hadn't always written down why in terms ICAEW would now recognise.
What am I actually changing in my client files from 1 July?
Three things, concrete. First, a "basis and authority" section on every tax planning file note where the outcome isn't trivially obvious - one paragraph citing the legislative provision, case reference, or HMRC manual page supporting the position. On that R&D call last Thursday the new note referenced CIRD80150, the client's technical project overview, and a Grant Thornton guidance note I'd consulted. Extra eight minutes.
Second, separating the technical view from the enquiry-risk view in client letters. The old combined paragraph - "in our view this qualifies, though HMRC scrutiny in this area is high" - is fine as client writing but blurred the credible-basis determination with the commercial risk warning. Now those are two sentences with different purposes.
Third, explicit "stand back" notes on any arrangement with meaningful quantum. Not reputational theatre - a single line asking whether, having identified a credible basis, the arrangement still passes the sniff test given the client's circumstances. For the R&D claim, easy. For the occasional directors' loan planning I see, less pleasant more often than I'd like.
Frank Haskew, ICAEW's Head of Taxation Strategy, told members that "members following PCRT should not find that the revisions present significant extra burdens" (ICAEW, 2026). I'd gently disagree in one direction only - the burden isn't where I already had good file notes. It's where I'd been running on professional instinct plus a short explanatory paragraph. Those get longer now.
Does this make me more liable if a client's position goes wrong?
Probably not in the way people fear. What it does is change what "reasonable care" looks like if a regulator reviews a file. A written credible-basis note, even a brief one, is now evidence that I applied the standard. Its absence is evidence I didn't.
It also gives me a cleaner way to decline work. The old "I don't think that'll fly" was a judgement call open to client pushback. "I can't identify a credible basis for that position in legislation, case law, or HMRC guidance" is not an argument. It's a file. Easier to say no.
How are the Big Four already handling this?
Internally, tighter than this. Big Four tax teams have long distinguished between "more likely than not" and "substantial authority" thresholds with formal review sign-offs above certain quantum. What ICAEW now asks smaller firms to do is a principles-based version of the same rigour, without the internal review machinery. For those of us who came through Big Four audit and absorbed the "document the judgement" habit, it lands softly. For practitioners who never worked inside a firm that documented tax opinions formally, the adjustment will be sharper - and it's where the AI tooling debate in cloud accounting intersects with this: an AI drafting your tax memo doesn't have a credible basis unless you sign off that it does.
FAQ
What is the "credible basis in laws and regulations" test?
It requires a professional accountant, before advising on a tax planning arrangement, to identify and be able to point to specific support for the position - in legislation, legislative intent, case law, industry practice, professional journals, or tax authority rulings and guidance. It sits alongside a "stand back" requirement to consider the reputational, commercial, and economic consequences of the arrangement beyond whether it technically works.
Does the new ICAEW Code of Ethics apply to ACCA members like me?
Not directly - the ICAEW Code binds ICAEW members. But ACCA members are bound by PCRT, which was updated on 1 January 2026 with the same credible basis language, and by ACCA's adoption of the IESBA international standard which came into force on 1 July 2025. So the substantive test has been live for ACCA members for longer than for ICAEW members - the ICAEW update on 1 July 2026 is a catch-up, not a new rule.
What do I need to document when giving tax planning advice from 1 July 2026?
ICAEW says members are encouraged to document, on a timely basis, their analysis: nature and purpose, ultimate beneficiaries, areas of uncertainty, judgements made, and courses of action considered. At a minimum, add a one-paragraph "basis and authority" note to every non-trivial tax planning file citing the legislative or case authority the position rests on.
Does this change how I need to handle R&D tax relief claims?
It tightens documentation on any claim near the HMRC CIRD guidance boundary. With SME claims down 31% year-on-year and enquiry activity visibly higher, the credible basis requirement maps onto what HMRC would scrutinise in an enquiry anyway. Borderline software development, process innovation, and sub-contracted R&D calls now get an explicit file note referencing CIRD guidance or relevant case law. A professional view recorded in an email thread is no longer enough.
If you advise clients on tax planning and aren't sure whether your current file notes clear the credible basis bar, I'm happy to run through a specific case with you - or review a redacted example note. Drop me a line and we can work through it together. You can also browse the rest of the /haroon blog for more practitioner-angle pieces.