In the last week, the Institute has responded to three technical consultations on draft legislation launched on L-day in July. Two of the consultations focus specifically on the behaviour of tax agents and fall under HMRC’s ‘Raising standards in the tax advice market’ project: ‘Enhancing HMRC’s powers and sanctions against tax adviser facilitated non-compliance’ and ‘Modernising and Mandating Tax Adviser Registration’. In both submissions, the Institute is recommending that the proposals therein are delayed until at least 1 April 2027. The Institute also responded to the consultation ‘Making Tax Digital for Income Tax and penalty reform’.
Enhancing HMRC’s powers and sanctions against tax adviser facilitated non-compliance
This consultation contains draft legislation to enhance HMRC’s powers against agents who facilitate non-compliance and includes the following measures which are currently scheduled to commence from 1 April 2026:
- Issuing file access notices to advisers suspected of facilitating non-compliance (the behaviour involved is reduced from dishonest conduct to deliberate behaviour),
- Significantly increased penalties where there is evidence of such behaviour, and
- Publication of details of advisers subject to any HMRC agent sanction.
The key recommendations in the Institute’s submission are that implementation should be paused to commence no earlier than 1 April 2027 given our concerns about the lack of effective safeguards in the draft legislation. A range of new safeguards have therefore been proposed, in addition to citing the need for HMRC to revisit the highly disproportionate penalties in the draft legislation (which are currently based on the potential lost revenue to the Exchequer of the agent’s client).
Modernising and Mandating Tax Adviser Registration
This consultation examines the proposal that from 1 April 2026, subject to a three month transition period, all tax advisers who interact with HMRC on behalf of their clients must register with HMRC and will not be registered unless they meet ‘minimum standards’. The requirement to register will not initially apply to those who already have an Agent Services Account. Anyone who is not registered will be unable to represent their clients.
Registration applications will require the name and address of the tax adviser and each ‘senior manager’ (essentially those at the highest level in the business, though not just those working in tax), together with confirmation that the eligibility conditions are met. To be eligible, the tax adviser and each senior manager must meet certain conditions including, inter alia, that they have no outstanding tax returns or payments and that they meet certain standards expected of tax advisers (which will be set and published by HMRC). There are also powers for HMRC to monitor eligibility and compliance with the rules on an ongoing basis and hefty sanctions for agents who fail to comply.
The Institute made the following recommendations in its submission:
- Given concerns that the proposals are a form of quasi-regulation of members of Professional Bodies who are already subject to heavy regulation, registration should be delayed to no earlier than 1 April 2027 to allow for more in depth consultation,
- The definition of ‘senior manager’ should only apply to those who provide tax services, and,
- Further detailed consultation is required on the proposed sanctions in the draft legislation, given the link to the potential for the agent’s details to be published under the consultation on ‘Enhancing HMRC’s powers and sanctions against tax adviser facilitated non-compliance’.
Making Tax Digital (MTD) for Income Tax and penalty reform
This consultation legislates for the changes announced in March at the Spring Statement. In our submission, the Institute’s key ask remains that the Government monitors readiness and progress and listens to and acts on feedback from stakeholders. Although our main objective is to drive the MTD readiness of our members ahead of time, the Institute will continue to listen to and share members concerns as April 2026 approaches, and where appropriate, seek mitigations from this policy change.
The Institute is flagging early that there is a high likelihood there will need to be some form of ‘soft landing’ for taxpayers, given the significance of this once in a generation change. HMRC should consider this and announce any soft landing, in particular it’s format, application, and parameters, as early as possible.
The Institute raised concerns across a range of other areas including the ability of HMRC to cancel/ reset penalties/penalty points, exemptions, the calendar quarters election, and the definition of digital records. We also took the opportunity to raise concerns about the extension of MTD to those with qualifying income less than £30,000 from April 2028.
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