Clamping down on tax advisers facilitating non-compliance

Last year, the government announced a series of measures to improve tax compliance by UK taxpayers and reduce the size of the UK tax gap permanently. One of the focuses of the government’s drive is to raise standards in the tax adviser market which it has already introduced initiatives to help try and achieve these aims:

• Requiring tax advisers that interact with HMRC on behalf of clients to register with HMRC.
• Investing £36m to modernise HMRC’s tax adviser registration services.

Spring Statement

The 2025 Spring Statement signified the next stage of the government’s campaign to improve standards in the tax adviser market with a consultation on enhancing HMRC’s powers at tackling tax advisers facilitating non-compliance.

The government accepts that most of the 85,000 tax advisers that support 12m individuals and businesses to comply with their tax obligations adhere to their professional standards and help taxpayers get their taxes right.

However, the government wants to ensure that HMRC has appropriate powers to effectively deal with the minority of tax advisers that undermine the tax system by facilitating non-compliance by taxpayers.

Current powers for dealing with dishonest tax advisers

Although, HMRC currently has powers to investigate tax advisers it can only use these powers if it has evidence of a tax adviser behaving dishonestly. If HMRC needs information to enquire into the conduct of a dishonest tax adviser, which the adviser will not provide voluntarily, it needs to apply to the First Tier Tribunal. HMRC can impose a fixed penalty ranging from £5,000 to £50,000 on a tax adviser behaving dishonestly and in certain circumstances it can publish the details of the tax adviser.

The consultation seeks views on whether the existing powers allow HMRC to effectively deal with non-compliance facilitated by tax advisers. It also seeks views on enhancing HMRC’s powers to investigate tax advisers and on introducing stronger penalties against tax advisers who contribute to the tax gap.

Proposed new powers

The new powers proposed to help HMRC address poor behaviour by tax advisers include:

• The ability for HMRC to investigate a tax adviser if it reasonably suspects the adviser has facilitated non-compliance.
• HMRC being able to notify the suspected advisor at the same time as requesting information, removing the need to seek tribunal approval.
• Enabling HMRC to impose a penalty relating to the potential tax lost because of the activity of the tax adviser.
• Permitting publication of the details of the tax adviser in relation to any sanction to address poor behaviour which results in non-compliance above a certain threshold.

Closer analysis of HMRC’s estimate of the tax gap shows that the share of the tax gap attributed to small businesses has risen from 44% to 60% over the last five years. It would be reasonable to assume that any new powers given to HMRC following the consultation, which closed on 7 May 2025, will help improve tax compliance in small businesses so the government can achieve its aim of closing the tax gap.

The government should also ensure HMRC continues to receive the appropriate level of funding and resource to effectively operate the disclosure facilities it has made available to small businesses and other taxpayers to correct their tax position. Currently taxpayers can experience delays in HMRC dealing with disclosures to correct their tax position so they can pay the correct amount of tax to help fund the country’s public services.