I updated my file-note template on 1 April. Not because I wanted to, but because the Finance Act 2026 replaced the old "dishonest conduct" test with something called "sanctionable conduct" - and the gap between those two words is where my practice lives.
TL;DR: From 1 April 2026, HMRC can penalise any UK tax adviser up to 1m for conduct intended to cause a loss of tax revenue. The old test required dishonesty. The new one requires intent, which is wider. If you give grey-zone advice, your file notes need to show how you reached your position. I have already changed how I document those calls.
What Changed on 1 April?
The Finance Act 2026 (s250 and Schedule 22) rewrote the rules on adviser misconduct (Finance Act 2026, Part 8). The old regime under Schedule 38 of the Finance Act 2012 required HMRC to prove "dishonest conduct" before accessing your client files or charging penalties. That was a high bar. Deliberate fraud, essentially.
The new test is "sanctionable conduct" - defined as doing or omitting to do something in the course of acting as a tax adviser "with the intention of bringing about a loss of tax revenue" (GOV.UK guidance, April 2026). Intention is not dishonesty. That is the shift.
How Steep Are the Penalties?
Penalties start at 7,500 minimum and scale to 1m on a first offence, based on potential lost revenue. For advisers penalised two to five times, the cap rises to 5m. After six penalties, there is no cap at all (GOV.UK, 2026). Any penalty above 7,500 triggers mandatory publication of your name on GOV.UK. For a sole practitioner like me, that is not a fine - it is a career-ending event.
HMRC can also issue a file access notice on "reasonable grounds" to suspect sanctionable conduct. Working papers containing deliberate or careless inaccuracies carry a separate penalty of up to 3,000 per error.
Why Does the "Intention" Threshold Worry Practitioners?
HMRC says this targets people who "deliberately do the wrong thing" and that "genuine mistakes" are protected. Fine. But intention is inferred from circumstances. I have handled R&D claims where the "advance in the field" test was arguable. I have written employment-status opinions where CEST gave one answer and my professional judgment gave another. I have advised on SEIS qualifying trade boundaries where the legislation is ambiguous.
None of those situations involved dishonesty. But all of them involved me taking a position HMRC might later disagree with. ICAEW has publicly stated the legislation is "too widely drafted" and risks impacting mainstream tax advisers (ICAEW, April 2026). The CIOT and ATT warned that the provisions "may unintentionally capture advisers acting reasonably and in good faith" (ATT briefing, 2026). Only around 65% of UK tax agents are members of a professional body - the rest operate without structured oversight at all.
Three Changes I Made in April
Three things, effective from my first April engagement letter.
First, every piece of grey-zone advice now gets a written "basis of position" note. Not new for aggressive planning (I never did aggressive planning). New for the middle ground: the R&D claim that probably qualifies, the employment-status call where I weighed the indicators and landed on self-employed, the partial-exemption calculation where I chose one method over another. Each note references the specific legislation, case law, or HMRC guidance that supports my position.
Second, my engagement letters now include a paragraph explaining that where a position involves uncertainty, I will document the basis and the risk. This is not a disclaimer - it is a record that the credible basis test demands.
Third, I am more explicit with clients about risk. Where I previously said "this should be fine," I now say "here is why I think this works, and here is the specific risk if HMRC disagrees." My file notes need to show I gave that clarity.
The Protection Is in the Paper Trail
The protected-conduct carve-out says you are safe if you "take a credible view of what the law requires, even where this might differ from HMRC's own view." That is reassuring on paper. In practice, the quality of your documentation is what separates a credible position from an inferred intention.
I am not losing sleep. I run a clean practice. But a 7,500 minimum penalty with your name on GOV.UK is not a regime you ignore.
Frequently Asked Questions
What is sanctionable conduct for UK tax advisers?
Sanctionable conduct means doing or omitting something while acting as a tax adviser with the intention of causing a loss of tax revenue. It replaced the old "dishonest conduct" test on 1 April 2026 under the Finance Act 2026, s250 and Schedule 22. The threshold is lower - HMRC needs to show intent, not fraud (GOV.UK).
Can HMRC penalise my accountant for advice that turned out to be wrong?
Not automatically. HMRC's guidance states that genuine mistakes, errors, or differences of legal interpretation are "protected conduct." The risk sits where HMRC infers intent from circumstances. If your accountant documented a credible basis for their advice, that documentation is the defence.
How much can HMRC fine a tax adviser under the new rules?
Penalties range from 7,500 minimum to 1m on a first offence, rising to 5m for two to five penalties and uncapped after six. Any penalty above 7,500 triggers publication of the adviser's details on GOV.UK (GOV.UK, 2026).
If you want a second opinion on how the sanctionable conduct rules affect your practice, or you need help tightening your file-note process, get in touch - I have been through the exercise myself and I am happy to walk through it.