Government plans for tackling promoters of tax avoidance miss their target

CIOT sets out its concerns in a letter sent to Exchequer Secretary to the Treasury Dan Tomlinson. This follows up representations made to HMRC on draft Finance Bill 2025-26 legislation on penalising non-compliance facilitated by tax advisers¹, mandatory registration of tax agents² and proposals to tackle promoters of marketed tax avoidance.³

In the letter, the Institute expresses its strong support for the objective of raising standards in the tax advice market. However, it argues that the current proposals are not well targeted, imposing potentially unworkable conditions on tax agents, whilst many of the “bad actors” who are the real target of these measures will be out of scope and able to continue their abuse of the system.

CIOT is concerned that, without changes, the proposals will lead many reputable advisers to withdraw from giving advice where the meaning of complex tax legislation is unclear, or where the potential tax liability is high, because of the risk of even honestly given advice leaving them liable to a very large penalty or even a criminal offence. This could mean some taxpayers may struggle to obtain tax services - leading to an increased number of errors and potentially a larger tax gap.

Ellen Milner, CIOT Director of Public Policy, said:

“The government are right to be taking a robust approach to those who continue to devise, promote or sell mass-marketed tax avoidance schemes. There should be no place for such people and their schemes in the tax services market.

“However, the current proposals are set to miss their target. According to HMRC, the market for tax avoidance schemes is now dominated by about 20 operators. These people are not mainstream tax and accountancy professionals and are largely based overseas. The legislation as drafted will struggle to capture these people.

“Meanwhile it could have a chilling effect on some areas of legitimate tax advice. For example, as currently drafted, the legislation around 'deliberate conduct’, which opens up advisers to large penalties, appears to encompass not just dishonest behaviour but also honest advice on legitimate legal interpretation issues.

“Additionally, we are concerned at proposals for the mandatory registration of all tax advisers who interact with HMRC, which risks missing the promoters of tax avoidance schemes, who don’t need to register despite displaying conduct that falls far short of HMRC’s minimum standards for agents.

“In all these areas a lot of work is still needed to produce effective and workable legislation. That is why we are asking the minister to delay the measures to allow HMRC to work with us and others to make the necessary improvements to deliver the government’s policy objectives. In particular we are asking the government to defer the registration requirement for tax agents until April 2027 to enable concerns to be addressed.”

Notes for editor

1. The draft legislation is designed to strengthen HMRC’s ability to deter and respond to tax adviser behaviour that facilitates non-compliance. The measure includes changes allowing HMRC to request information from tax advisers where there is reasonable suspicion of deliberate conduct, penalties for tax advisers who engage in deliberate conduct, calculated based on the tax loss and a new power allowing HMRC to publish details of advisers where they have been sanctioned.
2. The draft legislation introduces a legal requirement for tax advisers who interact with HMRC on behalf of clients to register with HMRC and meet minimum standards. This will begin from 1 April 2026, with a transitional period of at least 3 months.
3. The draft legislation proposes a number of measures for closing in on promoters of marketed tax avoidance, including expanding the scope of the disclosure of tax avoidance schemes (DOTAS and DASVOIT) regimes, introducing a universal stop notice and promoter action notice and tackling legal professionals designing or contributing to the promotion of avoidance schemes.

Read the full letter here.