HMRC has a new and considerably wider set of powers to deal with tax advisers who deliberately help clients pay less tax than they owe, effective since April this year. The regime, known as sanctionable conduct, was introduced by Schedule 22 of the Finance Act 2026, which amended the existing provisions in Schedule 38 of the Finance Act 2012 and replaced the dishonest conduct rules that had been in place since 2012. The stamp duty specialists at Compass take a look at what the new powers mean for conveyancers.
Under Schedule 22 of the Finance Act 2026, HMRC can penalise a tax adviser it finds has intentionally facilitated a loss of tax revenue. A first offence carries a penalty of between £7,500 and £1 million. Where the penalty exceeds £7,500, HMRC must also publish the adviser’s details on GOV.UK.
Separately, HMRC has the power to access a tax adviser’s files where it has reasonable grounds to suspect sanctionable conduct. Where the documents produced contain an inaccuracy that was deliberate or careless, HMRC can charge a penalty of up to £3,000 for each one found.
It is worth being clear about what the regime is actually aimed at. The sanctions themselves apply to intentional dishonesty, not to genuine mistakes. HMRC has said explicitly that a firm trying to do the right thing and getting it wrong does not fall within scope.
Reasonable suspicion
As has been confirmed in recent months, the term tax adviser is not limited to accountants or specialist tax practices. It can include an individual or organisation that provides advice or assistance in connection with another person’s tax affairs. When a firm advises a client on the SDLT treatment of a transaction, calculates the amount payable or prepares and submits an SDLT return, it is providing assistance in relation to the client’s tax affairs. The way in which the firm reaches, records and communicates its conclusions may consequently be relevant if HMRC later examines the matter.
For most firms, the sanctions threshold itself is not the relevant concern. The penalty regime is aimed at intentional dishonesty and was never designed with mainstream, well-run practices in mind.
HMRC’s power to access files is a different matter. It operates at a much lower threshold than the sanctions themselves, requiring reasonable suspicion rather than HMRC first proving that sanctionable conduct has occurred. HMRC can require the production of relevant working papers and audit files as part of that process. That means a firm can be asked to produce its records before HMRC has established that anything improper has taken place.
Beyond the calculation
The documents examined may extend beyond the final SDLT return or calculation and include the material used by the firm when advising the client and reaching its conclusion. This could include client questionnaires, correspondence, attendance notes, calculations, internal emails, records of enquiries, documents supplied by the client and communications with an internal or external specialist.
The quality of the file may therefore become important even where the tax treatment ultimately adopted was correct. This is where the practical exposure sits. A firm with no structured documentation has limited protection once files are examined, regardless of how sound its underlying advice actually was.
Without a clear record of the reasoning behind a position, there is little for the firm to point to if HMRC asks how and why that conclusion was reached. The completed SDLT return will usually record the outcome, but it will not necessarily explain the information considered, the questions asked or the reasoning applied. A correct answer without the supporting evidence may be substantially more difficult to defend than a conclusion supported by a clear, contemporaneous record.
Creating a defensible SDLT file
A defensible audit trail does not have to be disproportionately long or complex. It should, however, make it possible for someone reviewing the file at a later date to understand the basis on which the SDLT position was determined.
Depending on the transaction, the record should identify the relevant facts provided by the client, any further information requested and the answers received. It should record the basis for the calculation or treatment adopted, including any relevant legislation, HMRC guidance, professional material or specialist advice relied upon. Any assumptions, limitations or areas of uncertainty should also be recorded, together with the advice given to the client. Where a matter has been referred to an SDLT specialist, the file should retain both the information supplied to that specialist and the resulting advice.
The firm should also be able to demonstrate that the client was given the opportunity to review and approve the information contained in the return before it was submitted. Client approval does not transfer responsibility for the firm’s advice, but it can provide important evidence that the return reflected the information supplied and confirmed by the client. Standardised processes can help ensure that these records are created consistently rather than depending on the habits of an individual fee earner. Questionnaires, decision records, calculation reports and formal approval procedures can all contribute to a more reliable audit trail.
Files that pre-date the powers
The new regime should not be treated solely as an issue for matters opened after 1st April 2026. HMRC’s guidance states that a file access notice issued after that date can request documents that existed before the regime came into force.
Earlier documents cannot be used to determine the amount of a sanctionable conduct penalty under the new rules. HMRC’s guidance is clear, however, that this earlier material can be used to indicate a past pattern of behaviour, to indicate the extent of any sanctionable conduct and to inform its decision on whether to investigate a matter criminally.
Firms should therefore consider not only the procedures being applied to new transactions, but also whether older SDLT records remain accessible, complete and intelligible. A technically sound process offers less protection if the supporting documents cannot be located or if the reasoning cannot be reconstructed from the file.
The case for a consistent audit trail
A defensible audit trail addresses the practical risk created by the new powers. Clear, contemporaneous records of what advice was given, what information was considered and why a particular conclusion was reached limit a firm’s exposure whether or not sanctionable conduct is ever alleged.
In effect, the file access power creates a practical case for maintaining that audit trail across the board, not just for the small minority of advisers the sanctions regime is actually designed to catch.
For conveyancing practices, the central message is not that ordinary SDLT errors will suddenly be treated as deliberate wrongdoing. It is that the ability to demonstrate a careful and reasonable process has become more important. Where HMRC asks questions, a complete file can show not only what conclusion was reached, but that the firm approached the matter properly, obtained the relevant information and had a credible basis for the advice it gave.
About the author
Compass provides specialist stamp duty land tax services to property professionals, ranging from risk screening to fully outsourced SDLT handling. Its Concierge service includes assessment, expert indemnified calculation, client liaison and HMRC submission.
