HMRC’s powers over dishonest agents sit in Schedule 38 to the Finance Act 2012. For conduct from 1 April 2026 the test is “sanctionable conduct”, meaning acting with the intention of bringing about a loss of tax revenue, and HMRC can demand the adviser’s working papers with a file access notice, issue a conduct notice and charge a penalty based on the tax put at risk. Conduct before that date is still dealt with under the old “dishonest conduct” rules, with penalties of £5,000 to £50,000.

Which regime applies, the old one or the new one?

The Finance Act 2026 rewrote Schedule 38 from 1 April 2026, replacing “dishonest conduct” by “tax agents” with “sanctionable conduct” by “tax advisers”. HMRC’s Compliance Handbook at CH176140 says it can charge sanctionable conduct penalties only where the conduct happens on or after 1 April 2026, but can still charge dishonest conduct penalties for conduct before that date. A file access notice issued after 1 April 2026 can ask for documents that already existed, for example to show when an adviser relationship began.

The two tests differ in an important way. Under the old rules, at CH181120, dishonest conduct meant doing something dishonest, in the ordinary meaning of the word, with a view to bringing about a loss of tax revenue. Under the new rules, at paragraph 3 of Schedule 38, the question is intention to bring about a loss of tax revenue. In both versions it does not matter whether any loss actually results or whether the adviser was following the client’s instructions.

The general standards HMRC expects of agents, and its other tools such as suspension under the registration rules, are covered in the HMRC standard for agents. This page follows a sanctionable conduct case from first suspicion to publication.

Who can be investigated and what counts as a loss of tax?

CH176160 defines a tax adviser as an organisation or individual who, in the course of a business, assists others with their tax affairs, whether based in the UK or overseas. That includes sole practitioners, firms, business advisers and the directors, partners, members, employees and contractors of a practice. Free or pro bono help is outside the regime unless it is given to promote a business. Assistance includes advising, acting as agent, helping with any document HMRC is likely to rely on, and help given for other purposes knowing it will be used for tax.

A loss of tax revenue, at CH176540, means causing a client to account for less tax than the law requires, to obtain more relief than they are entitled to, or to pay tax late or claim relief early. Taxes in scope include income tax, capital gains tax, corporation tax, CIS deductions, VAT, insurance premium tax, inheritance tax, Stamp Duty Land Tax and stamp duty reserve tax. Acting in line with a published extra statutory concession counts as acting in accordance with the law.

HMRC’s own guidance says sanctionable conduct means deliberately doing the wrong thing and does not include advisers who make mistakes while trying to do the right thing. Its examples are knowingly claiming a repayment a client is not entitled to, knowingly submitting an incorrect return, and knowingly failing to notify HMRC that tax is due.

When can HMRC issue a file access notice?

CH177020 describes two cases. In Case A, HMRC has reasonable grounds to suspect the adviser is engaging, or has engaged, in sanctionable conduct. In Case B, the adviser has been convicted of a tax offence involving fraud or dishonesty committed after becoming a tax adviser, and appeal rights have expired or been exhausted within the last 12 months. The notice requires “relevant documents”, meaning working papers and other documents used in assisting clients. In Case A it can cover only the clients named in the notice.

“Reasonable grounds to suspect” requires specific facts that another person would also regard as reasonable grounds; CH177060 says it does not allow speculative fishing. HMRC’s examples contrast a firm submitting large numbers of invalid repayment claims while advertising guaranteed refunds, where suspicion is reasonable, with an adviser who gave correct advice on facts the client got wrong, where it is not.

Some material is protected. A notice cannot require legally privileged information (CH177210) or documents that originated more than 20 years before the notice and have no bearing on later periods (CH177200). In firms, HMRC’s guidance says a notice will usually be directed to the firm before any individual employee.

Can a file access notice be challenged?

HMRC can issue a notice to the adviser without tribunal approval, but a notice to a third party who holds the papers needs approval in advance (CH177140). Before applying, HMRC must tell the document holder it will require the papers, give a reasonable opportunity to make representations and pass a summary of them to the tribunal. HMRC expects to seek approval only in limited cases, such as where an adviser has previously ignored a notice.

A notice the tribunal has approved cannot be appealed by the adviser. An unapproved notice can be appealed in writing to the officer within 30 days, stating the grounds, and the tribunal can confirm, vary or set aside the notice or any requirement in it (CH177240).

What happens if the papers are not provided or are inaccurate?

  • Failing to comply without reasonable excuse brings an initial £300 penalty and daily penalties of up to £60. If the failure continues for more than 30 days after the first daily penalty, HMRC can ask the tribunal to raise the daily rate to up to £1,000 (CH177310). No penalty is charged if HMRC allows more time and the papers arrive within it.
  • A deliberate or careless inaccuracy in papers produced can cost up to £3,000 for each inaccuracy, though CH177360 says the maximum is for very serious deliberate cases.
  • Concealing, destroying or disposing of a required document is a criminal offence carrying up to two years’ imprisonment on indictment (CH177340). This can apply even before a notice is issued, for up to six months after HMRC says it is likely to request the document.

What is a conduct notice and what follows it?

When HMRC has enough evidence to decide, on the balance of probabilities, that sanctionable conduct has occurred, an authorised officer approves a conduct notice stating its reasons (CH178010 and CH178020). A penalty cannot be charged without one. The adviser should get a reasonable opportunity to make final representations, and if the explanation changes HMRC’s view the notice is withdrawn. Where several advisers contributed to the same loss, HMRC can act against each, or against the firm that directed the work.

The penalty is based on the potential lost revenue. Under paragraph 26 of Schedule 38 a first penalty is 70% of the potential lost revenue, with a minimum of £7,500 and a cap of £1 million. Disclosure reduces the percentage, but not below 35% for a prompted disclosure or 20% for an unprompted one. HMRC’s guidance sets higher percentages and caps for repeat penalties within 4 years. The penalty can be appealed within 30 days on both whether it is due and its amount, with the option of an HMRC review first, and need not be paid while the appeal is considered (CH179240).

Under the old regime, by contrast, the penalty ran from £5,000 to £50,000 (CH184100), and publication was possible where it exceeded £5,000 and the agent had not made a full disclosure.

When will HMRC publish an adviser’s details?

For sanctionable conduct, publication is compulsory once the penalty is more than £7,500. HMRC says it will give advance notice and may publish the adviser’s name and postcode, nature of business, periods of conduct, penalty amount and other identifying details, and that the decision to publish cannot be appealed. It may also name the firm the adviser works or worked for, after giving the firm a chance to respond.

What should a firm do if a notice arrives?

Illustration only. A practice receives a file access notice naming three clients whose returns claimed a relief they did not qualify for. It checks whether the notice was approved by the tribunal, because that decides whether an appeal is possible, and diarises the 30 day appeal window and the production date. It places a hold on all files for those clients so nothing is deleted, separates any privileged material, and asks HMRC for more time in writing if production by the date is not realistic. It also notifies its professional indemnity insurer under the policy conditions and takes specialist advice, because how it deals with the notice and whether it discloses are both factors HMRC weighs in setting any penalty.

Related powers against clients and third parties are described in Schedule 36 information notices and third party information notices, and the most serious fraud cases in COP9 investigations.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.