Key takeaways
- Sections 159 to 165 of the Finance Act 2026 prohibit promoting certain tax avoidance arrangements. The rules came into force on 19 May 2026.
- Promotion is prohibited if the arrangements are marketed as giving a tax advantage but have no realistic prospect of achieving it, or fall within a type specified in regulations.
- Penalties include up to two years' imprisonment and civil penalties of up to £1 million plus £5,000 per participant.
- A person can be promoting prohibited arrangements even if unaware that they are prohibited.
- The Economic Secretary said the rules are not aimed at advisers who work to a high professional standard and make a genuine, good-faith mistake.
It has been a criminal offence since 19 May 2026 to promote certain tax avoidance arrangements. HMRC published detailed guidance on the prohibition on 30 October 2026. The rules sit in sections 159 to 165 of the Finance Act 2026 and cover arrangements that have no realistic prospect of delivering the tax advantage they are marketed for, plus types HMRC specifies in regulations.
What is prohibited
The legislation makes it an offence to promote arrangements that meet either of two descriptions:
- The arrangements have been, or are likely to be, marketed as providing a particular tax advantage, but there is no realistic prospect that the advantage will be achieved.
- The arrangements fall within a type specified in regulations made by HMRC.
Arrangements can fall within both categories. A person promotes prohibited arrangements even if they do not know the arrangements are prohibited.
What counts as “no realistic prospect”
The legislation does not define the phrase. HMRC’s guidance lists indicators:
- the facts are the same as, or substantially similar to, a case where a court ruling would stop the scheme working
- the tax advantage depends on users not meeting an obligation because doing so would make no economic sense, such as taking a loan they do not expect to repay
- the prospect of success rests on factual claims or legal opinion that HMRC sees as entirely without merit or contradicted by documents
HMRC also says it will not grant Extra Statutory Concessions where a taxpayer is trying to use the concession for tax avoidance. Arrangements that rely on an ESC to access a relief can therefore fall within the rules.
What counts as marketing
The guidance says HMRC does not need to identify a person who marketed the scheme, or a person who received the marketing. If the main advantage, or one of the main advantages, of the arrangements is a tax advantage, HMRC’s view is that it is reasonable to infer they are likely to be marketed on that basis, unless the facts show otherwise. Evidence of marketing strengthens a case but is not required.
Penalties
| Route | Maximum consequence |
|---|---|
| Criminal conviction | Fines and up to two years’ imprisonment |
| Civil penalty | Up to £1 million plus £5,000 per participant |
| Interest | Penalties carry interest |
| Directors | Penalties link to the joint and several liability rules for directors and shadow directors |
The legislation prevents a penalty being charged for anything for which a person has already been convicted.
Who the rules are aimed at
The guidance quotes the Economic Secretary to the Treasury, Lucy Rigby MP, speaking on 3 February 2026. She said the clauses target “those who continue to promote tax avoidance” and 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”.
The tax advantage definition is the same as that used elsewhere in the promoters of tax avoidance schemes legislation. It covers reliefs, repayments, avoiding or reducing a tax charge, deferral and avoiding an obligation to deduct tax.
How it fits with the Budget
Budget 2026 adds further compliance measures. The promoter regime is extended fully to VAT and indirect taxes, and a consultation on serial users of avoidance schemes is coming. HMRC will also recruit 670 more compliance officers by 2029 to 2030. See HMRC compliance and enforcement.
What advisers should do
- Review the products and structures you recommend. Test each against the two prohibited categories.
- Be careful with schemes that rely on a concession. HMRC will not accept ESC use for avoidance.
- Check marketing. Promotional material, referral arrangements and introducers can all amount to promotion.
- Keep records of your due diligence. They show how you reached a view on the prospect of success.
- Tell clients who have been offered schemes. They should ask for the evidence, and take independent advice before joining one.
Our guide to HMRC penalties and HMRC compliance checks cover what happens when HMRC challenges a position.
Frequently asked questions
When did the ban on promoting tax avoidance start?
The rules came into force on 19 May 2026. HMRC published its detailed guidance on 30 October 2026.
What is the penalty for promoting prohibited tax avoidance?
Up to two years’ imprisonment on conviction, and civil penalties of up to £1 million plus £5,000 per participant.
Does it apply if I did not know the scheme was prohibited?
Yes. A person is promoting prohibited arrangements even if unaware that they are prohibited.
Does the rule target ordinary tax planning?
The Economic Secretary said it is not intended for legitimate advisers who work to a high professional standard and make a genuine, good-faith mistake. The test is whether there is no realistic prospect of achieving the advantage, or whether regulations specify the type of arrangement.
Sources
Rates, thresholds and rules in this guide were checked against HMRC and GOV.UK guidance on 1 November 2026. Tax rules change, so check the current position on GOV.UK or with a qualified adviser before acting. This guide is general information, not personal advice.