HMRC has issued new guidance outlining tough rules that could see people jailed for up to two years for promoting certain tax-avoidance schemes. The rules came into force on May 19, 2026, and are designed to crack down on those who promote arrangements with no realistic prospect of delivering the promised tax advantage.
Those who break the rules could face large fines or even prison, although the Government has stressed that legitimate tax advisers who make a "genuine mistake" in good faith are not the target. The rules apply to people promoting certain tax avoidance arrangements rather than ordinary taxpayers who simply make a mistake with their tax affairs.
Penalties for breaching the rules
HMRC says a person who breaches the prohibition could face criminal sanctions, including an unlimited fine and up to two years in prison following conviction on indictment. Civil penalties can also be imposed, with the maximum reaching £1 million plus another £5,000 for each person who participated in the arrangements while they were prohibited.
The new rules cover two main types of tax arrangements. The first involves arrangements which are marketed, or are likely to be marketed, as offering a particular tax advantage when there is no realistic prospect of that advantage actually being achieved. The second covers types of arrangements which have specifically been prohibited through regulations.
What counts as promoting
HMRC says someone can be considered to be promoting an arrangement if, as part of their business or for financial gain, they encourage someone else to use it, make it available to them or help organise or manage it. This could include, for example, a financial adviser who sends marketing material about a prohibited scheme to clients and encourages them to take part.
However, simply filing a tax return as an adviser does not automatically count as promoting a scheme, provided certain conditions are met. The Government has also sought to reassure legitimate tax professionals that the rules are not aimed at advisers who make an honest error.
Government reassurances and enforcement
Economic Secretary to the Treasury Lucy Rigby said the measures are "about targeting those who continue to promote tax avoidance." She added: "They are very much not intended to be directed against legitimate tax advisers who operate to a high professional standard, but who may, acting in good faith, make a genuine mistake."
HMRC says a person could still be considered to be promoting prohibited arrangements even if they made a "genuine mistake" and were not aware that the arrangements were prohibited. Its guidance also makes clear that simply not knowing about the new legislation would not automatically help someone avoid a civil penalty.
However, criminal investigations will not be used in every case. HMRC says these will be reserved for cases where it needs to send a "strong deterrent message" or where the behaviour is serious enough that a criminal sanction is considered appropriate.
HMRC itself does not ultimately decide whether somebody is prosecuted. Cases are handled by the relevant independent prosecution authority, such as the Crown Prosecution Service in England and Wales, while it is ultimately for the courts to decide whether an offence has been committed.
The rules can also apply to people in senior positions at companies or partnerships. Directors, managers and other responsible people could potentially face criminal liability where an offence was committed with their consent or connivance, or where it was attributable to their neglect.
