HMRC Targeting “Unethical” Tax Advisers

HMRC could soon hit dishonest tax advisers with penalties up to £50,000, public naming and stricter investigations.

The UK government has launched two new consultations to bring hefty sums aimed at closing the £40bn budget gap. The first one focuses on criminalising the promotors of aggressive tax avoidance scheme. The other one, which runs from 26 March to 7 May 2025 aims to give HMRC more power to punish tax advisers who misuse the tax laws.

These powers include penalties of up to £50,000, public naming of offenders, and stronger investigation rights. These powers are likely to be controversial, especially among tax advisers who believe they operate within the rule.

HMRC’s Tougher Rules for Tax Advisers

HMRC is seeking opinions to strengthen its power against dishonest tax advisers. The consultation document covers:

• Effectiveness of HMRC’s current powers in dealing with non-compliance facilitated by tax advisers
• Giving HMRC more power to investigate tax advisers suspected of misconduct
• Allowing HMRC to request information from tax advisers if suspected of misconduct
• Tougher penalties for tax advisers who contribute to tax loss
• Publishing names of tax advisers with HMRC’s sanctions
• Informing professional bodies about concerns of their members’ activities even if it does not meet the formal disciplinary thresholds

The purpose of this consultation is to ensure more effective action against tax firms that harm the system.

Examples of bad practices cited in the consultation document includes false R&D tax relief claims, incorrect tax refund requests and inaccurate tax returns.

Rogue Tax Advisers to Face Stricter Financial Penalties

Right now, tax advisers charged with misconduct face financial penalties ranging from £5,000 to £50,000, irrespective of the potential tax loss.

However, HMRC is proposing tougher penalties in consultation documents. It seeks to align penalties with the loss in tax revenue and the possibility of raising the penalty up to 100% of lost tax. This could mean millions in fines and penalties in extreme cases of misconduct.

An alternative approach is also cited in the consultation document, which seeks to base penalties on the fees charged by the tax advisers. Further tweaks are expected, and penalties may no longer be limited to tax advisers and taxpayers but could extend to advisory companies and firms as well.

Naming & Shaming

HMRC seeks to publish the list of tax advisers with sanctions and penalties aimed at naming and shaming those who break the rules. While some tax advisers might see it as a badge of honour and publicity, the same cannot be said for those with professional qualifications.

If HMRC gains authority as proposed in consultation documents, it won’t be necessary to report advisers to professional bodies. There is even a suggestion to name advisers even if their actions do not constitute misconduct. Many professionals and stakeholders see it as excessive.

Conclusion

Currently, HMRC is facing difficulties in tackling dishonest tax advisers. To combat this, HMRC is seeking more authority through consultation documents. This includes, but is not limited to, tying penalties to fees charged or loss in tax revenue, public naming of offenders and strong investigation rights.

If these consultations go through and HMRC acquires all the proposed powers, they will be able to act quickly and impose stricter consequences. However, these proposals are still being considered.