Government Tax Avoidance Plans Miss Target
Government Tax Avoidance Plans Miss Intended Targets
The Chartered Institute of Taxation (CIOT) has issued a formal warning to government that the latest legislative proposals targeting rogue tax agents and those responsible for promoting tax avoidance schemes are misdirected. While intending to raise standards in the tax advice market, the draft Finance Bill 2025-26 is, according to the Institute, more likely to create difficulties for compliant advisers than to catch the primary offenders.
Key Points of Concern
Scope of Legislation: The measures place heavy compliance burdens on the majority of reputable UK-based tax advisers but fail to capture the overseas, non-mainstream actors who dominate the avoidance scheme market.
Adviser Withdrawal: There is a risk that respected advisers may withdraw from offering guidance on complex or high-liability tax matters, owing to exposure to severe penalties—even where advice was provided honestly and in good faith.
Impact on Taxpayers: A shortage of reliable advice for complex issues could lead to increased taxpayer errors and, ultimately, a larger tax gap.
Mandatory Registration Loophole: Mandatory registration with HMRC is proposed for all tax agents who interact with the agency, but the promoters of avoidance schemes—often operating outside the scope of HMRC standards—may evade these requirements entirely.
A View from the CIOT
Ellen Milner, the Institute’s Director of Public Policy, stated:
“The government is right to pursue those who devise and sell mass-marketed tax avoidance schemes. There should be no place for such schemes in the UK market. However, the current proposals are set to miss their target. According to HMRC, the market is now dominated by about 20 operators, mostly overseas and not mainstream professionals. The legislation as drafted will struggle to capture these people.”
She further warned that the legislation around ‘deliberate conduct’ risks conflating honest differences of legal interpretation with dishonest behaviour, opening advisers to disproportionate penalties.
Legislative Background
The letter sent by CIOT to the Exchequer Secretary to the Treasury outlines a series of representations made on:
Draft legislation penalising non-compliance facilitated by tax advisers (details)
Mandatory registration of all tax agents (details)
New proposals to tackle the promoters of marketed tax avoidance (details)
Why the Proposals Fall Short
The CIOT supports raising standards but argues that:
The compliance regime will be unworkable for many mainstream agents.
Overseas operators and non-professionals, who are the main source of abuse, will remain largely untouched.
The risk of large penalties or even criminal charges will chill legitimate, good-faith advice.
Discouraging reputable advice increases the risk of taxpayer error and non-compliance.
Recommendations and Next Steps
The CIOT has called on government to:
Delay the implementation of these measures to allow proper consultation.
Work with CIOT and others to improve the legislative framework.
Defer the registration requirement for tax agents until April 2027.
In summary:
| Issue | CIOT View | Likely Effect |
|---|---|---|
| Mainstream agent burden | Excessive and unworkable | Reduced compliance advice |
| Overseas promoters | Not adequately covered by new rules | Continued abusive schemes |
| Honest legal interpretation | Penalised as deliberate conduct | Chilling effect on legitimate advice |
| Registration requirement | Promoters likely to evade | Loophole remains |
Conclusion
The CIOT is clear: the government’s plans, as currently drafted, are not fit for purpose. They may deter reputable advisers from offering much-needed guidance, while failing to stop the real offenders. The Institute urges a measured, collaborative approach to ensure that new legislation is both effective and workable, protecting the integrity of the UK tax system and the ability of taxpayers to access proper advice.
“A lot of work is still needed to produce effective and workable legislation. We ask the minister to delay the measures, allowing HMRC to work with us and others to make the necessary improvements.” – Ellen Milner, CIOT
What Should Contractors Do?
Monitor developments: Stay alert for changes in legislation and consultation periods.
Engage with professional advisers: Choose those who demonstrate compliance with established standards.
Review arrangements: If you have engaged with marketed avoidance schemes, seek independent advice promptly.
For more details, read the full CIOT letter here.
Further Reading
Enhancing HMRC’s powers: tackling tax adviser facilitated non-compliance
Proposals to close in on promoters of marketed tax avoidance
Call to Action
Contractors and agents should:
Stay informed about the evolving legislative landscape.
Participate in consultations where possible, making your voice heard on workable and effective tax policy.
Work only with registered, reputable advisers who act within the law and uphold professional standards.
