On 21 July 2025, draft legislation was published for inclusion in Finance Bill 2025/26 proposing that only tax advisers who are formally registered with His Majesty’s Revenue and Customs (“HMRC”) will be allowed to interact with HMRC on behalf of their clients. HMRC’s explanation of the policy rationale behind these proposals is to raise professional standards and ensure greater accountability within the tax advisory sector. The new legislation is set to apply from 1 April 2026 with a transitional period of at least three months. However, at the time of writing in November 2025, many key aspects of the registration process remain unsettled. Tax advisers will have only a limited timeframe to understand and comply with these forthcoming requirements.

Understanding the Scope of the Legislation

Section 2 of the draft legislation to be included in Finance Bill 2025/26 states that tax advisers may not interact with HMRC unless registered. The definition of “interacting” is broad and includes contact by telephone, post, email, sending a message to HMRC through a website or internet portal, or any other form of communication, including filing returns, claims, notices, or other documents with HMRC. Despite the broad scope of “interacting”, a number of significant legislative gaps remain. Most importantly, advisers who act solely in an advisory capacity without direct contact with HMRC appear exempt from registration, an oversight which, if unaddressed, would allow ‘bad actors’ to shield behind clients when providing advice advocating tax avoidance.

Section 2(5) clarifies that when employees interact with HMRC as part of their role within a tax advisory organisation, the interaction is treated as being carried out both by the individual and the organisation. Section 3(1) exempts these individuals from registering individually if they are acting “in the course of business carried on by the organisation”. This suggests that it is the organisation rather than individual employees who will be responsible for registration. Further guidance to clarify this point would be helpful.

The Registration Application

Details of the registration process have not been published at the time of writing in November 2025. The draft legislation indicates that applications must include the tax adviser’s name and address, the names of any “senior managers”, a statement confirming eligibility, and any additional information HMRC may request. The inclusion of “senior managers” in the application raises complex issues about who qualifies as a senior manager under the legislation.

Senior Managers: An Expansive Definition

For companies, senior managers include directors and shadow directors. For limited liability partnerships or other body corporates whose affairs are managed by its members, a senior manager is a member who “exercises functions of management”, or a person purporting to act in such a capacity or a shadow member. The scope of what constitutes “exercising functions of management” remains undefined. In partnerships, senior managers are partners or those acting as such. This expansive, and somewhat vague, definition means that senior managers are not necessarily individuals who control the firm’s tax work specifically. In larger firms, this could encompass hundreds of professionals, many of whom may have no direct involvement with tax advice at all.

The senior manager definition complicates eligibility requirements, as the entire group of senior managers within an organisation must meet certain criteria to maintain registration.

Eligibility Conditions

Tax advisers and each of their senior managers must satisfy the eligibility conditions A to C, each of which is set out in section 5 of the draft legislation to be included in Finance Bill 2025/26.

Condition A requires that the tax adviser in question has no outstanding tax returns or amounts of tax due and no insolvency, tax or certain sanctions, disqualifications, or convictions. The drafting in this section does not take into account minor errors or genuine mistakes and does not specifically state UK tax returns or UK tax liabilities.

The application of these rules to larger firms could be very challenging as every senior manager’s personal tax compliance and financial standing would, under the draft legislation, affect the entire organisation’s eligibility. This would be hugely problematic for large firms which would have to ensure every partner is fully compliant with their personal tax affairs. Firms will need to have effective mechanisms in place to monitor the continued eligibility of their senior members. Some form of more proportionate drafting in the legislation would appear to be essential if the Government’s proposals for Condition A are to be workable.

Condition B requires that the tax adviser and each senior manager will need to meet any professional standards specified by HMRC. However, these standards have not yet been published and concerns have been raised about the possibility of subjective or ambiguous criteria being applied. The Chartered Institute of Taxation (“CIOT”) has expressed concern that the eligibility criteria under Condition B gives HMRC “unfettered powers”, effectively introducing regulation by the back door, creating a conflict of interest, and undermining trust in the tax system. The CIOT have expressed that if Condition B is retained in the legislation there needs to be safeguards in place to ensure independence and transparency.

Condition C requires tax advisers to register with a supervisory authority for anti-money laundering purposes, aligning tax adviser regulation with broader financial compliance frameworks.

Enforcement and Sanctions

Tax advisers who fail to comply with registration requirements after receiving a compliance notice can be fined £5,000, or £10,000 if the offence is repeated or occurs while suspended or prohibited. Senior managers may be personally liable for the same penalties if they are deemed responsible for the adviser’s non-compliance and repeated breaches can result in suspension or permanent prohibition from registering. Advisers must also notify clients of any suspension or prohibition and failure to do so may incur separate penalties of £5,000 per client.

Industry Response and Concerns

Professional bodies have raised concerns over the draft legislation. The CIOT contends that the new rules will not effectively target rogue tax agents or abusive tax avoidance promoters. Instead, the CIOT fear it will make access to legitimate tax advice more difficult for many taxpayers. The CIOT advocates delaying the implementation until April 2027 to allow for more detailed consultation and clarification.

The concerns of the CIOT have been echoed by other leading professional bodies, including the Institute of Chartered Accountants in England and Wales and The Association of Taxation Technicians.

Concluding remarks

The proposed requirement for tax advisers to register with HMRC marks a significant regulatory change aimed at improving professional standards and accountability. While many professional bodies appear to be open to the possibility of registration to raise professional standards for tax advice, the draft legislation raises numerous questions that require clarification. Firms will face operational challenges in monitoring the compliance of their senior managers. Professional bodies have warned that without further clarification and safeguards the rules could limit access to legitimate tax advice and undermine trust in the system. With key details still missing and a tight implementation timeline, a delay to allow further consultation and refinement appears both necessary and justified.