HMRC Increases Powers Against Tax Avoidance
Tax Avoidance Crackdown: What the New Legislation Means
A Significant Expansion of HMRC's Powers
Following Royal Assent of the Finance Bill, HMRC will implement strengthened measures to address tax avoidance schemes. These updated arrangements will broaden the scope of existing powers and introduce criminal liability for a wider scope of companies and professionals connected to the marketing or facilitation of tax avoidance schemes.The changes specifically target promoters of marketed tax avoidance schemes and professionals involved in enabling or marketing these arrangements. Businesses providing supporting services—such as banks, insurers, and technology companies—are also within scope. Providers of recruitment, consultancy, and payroll services are likely to be affected as well.
Enhanced Deterrence and Enforcement
Key aspects of the new powers include:- Making it a criminal offence to fail to notify HMRC of tax avoidance schemes, increasing accountability and discouraging non-compliance.
- Allowing HMRC to issue financial penalties directly, without the need for tribunal approval, expediting enforcement processes.
- Extending coverage beyond income tax, to arrangements that seek to avoid VAT and other direct taxes.
- New rules become effective April 2026.
- Businesses potentially affected should review their compliance and reporting processes now.
- Professionals advising on or supporting tax arrangements should ensure they are up to date with the latest legal requirements and guidance.
There have been repeated instances where similar tax avoidance arrangements have been replicated across multiple companies. To address this, HMRC is introducing Universal Stop Notices (USN). Any company offering schemes similar to those identified through a USN may face public disclosure, financial sanctions, and criminal prosecution.
Promoter Action Notices (PAN) will also be used to prevent third parties, such as banks and software providers, from supplying services that assist those engaged in avoidance schemes. Recent trends show banks increasing internal checks on customer activities, and similar scrutiny is expected to spread across related industries.
Additional provisions enable HMRC to seek improved access to banking and financial records, subject to tribunal approval, with the aim of reaching those orchestrating these schemes. Legal professionals facilitating the promotion of avoidance may be publicly named.
Focus on Tax Advisers and Agents
From April 2026, further enhanced powers come into effect targeting advisers and agents suspected of involvement in or facilitation of non-compliant tax arrangements. These measures reduce procedural barriers, allowing HMRC to access files and records on the basis of reasonable suspicion, without requiring prior hearings or multiple approvals.Tax agents and their employees complicit in non-compliance can be publicly named and shamed. Penalties extend to the removal of their authority to act in future as agents with HMRC.
HMRC's stated approach marks an effort to move ahead of the ongoing trend of avoidance scheme creators adapting tactics to evade detection and accountability.
Industry Reactions and Sources
A statement from HMRC summarizes the intended impact: "Promoters of marketed tax avoidance schemes, and other professionals who market or enable the marketing of tax avoidance schemes, including within the tax, accounting and legal professions, are likely to be affected by these measures."The sector has witnessed persistent use of disguised remuneration and other tax avoidance arrangements. HMRC intends these criminal penalties and public naming provisions to act as strong deterrents, but notes that enforcement remains essential for effectiveness.
What to Watch For Next
Ongoing and visible enforcement is expected to follow the legislative changes. The consequences for individuals and companies, including criminal prosecution, significant financial penalties, and reputational damage, mean early compliance review is recommended.
