Draconian HMRC ‘Interaction Register’ Set to Drive Tax Advisers Out of Market, Warns ICAEW

The UK government’s latest plan to introduce a mandatory register for any tax adviser involved in ‘interaction with HMRC’ has come under fierce criticism from the Institute of Chartered Accountants in England and Wales (ICAEW). The professional body warns that the proposed legislation will not only impose significant extra costs on the honest majority of advisers but could also force many professionals out of the market, ultimately harming the UK tax system and the country’s competitiveness.

Widespread Industry Alarm

Government proposals, due to take effect from April 2026, would require all tax advisers who interact with HMRC to register, with non-compliance exposing advisers to new and substantial penalties. Notably, penalties could be levied on advisers even if they have acted properly, simply because HMRC deems that more tax is due on a client’s return. The draft Finance Bill 2025/26 also introduces a strict liability criminal offence for failing to disclose tax avoidance schemes, and even partners in limited liability partnerships could be penalised for late personal tax returns.

The ICAEW, representing thousands of tax professionals, accountants, and lawyers, claims the catch-all nature of the proposals—especially the vague definition of ‘interaction with HMRC’—would make the UK one of the most difficult tax environments in the world for practising professionals.

Missed Targets and Unintended Consequences

In a statement, the ICAEW said: “As drafted, the legislation misses the target. On mandatory registration for all tax practitioners who interact with HMRC, the plans amount to quasi-regulation, as the eligibility criteria would allow for monitoring against a prescribed standard. It could also ban a firm from providing tax advice if just one of its partners was late in filing their own personal tax return.”

Calling for a deferral of the scheme to April 2027 to allow for further consultation, the ICAEW emphasised its support for policies that genuinely aim to raise standards and drive out bad actors. “However, these proposals don’t achieve those objectives and would not improve standards in the tax market,” the organisation warned.

Threat to Access and Growth

Alan Vallance, ICAEW chief executive, said: “These proposals will simply add costs and burdens to businesses, some of whom may find they can no longer access the tax advice they need. Under these plans, the UK will become the most difficult tax environment in the OECD, with tax advice unaffordable and inaccessible alongside a negative impact on our long-term tax compliance culture.”

He added: “They will make it harder for people to access the tax advice they need, which means the wrong tax will be paid, costing both businesses and HMRC time as they try to resolve matters—taking their focus away from growth. These proposals undermine the prospects for growth when we need it more than ever, and we are calling on the government to revisit these plans.”

Concerns Over Confidentiality and Market Impact

The ICAEW also highlighted concerns that HMRC would gain access to confidential client papers through advisers, even in the absence of dishonesty. Such powers, they argue, could make the UK a less attractive destination for global business and inward investment.

There is also anxiety that the lower bar for penalising advisers may deter professionals from taking on clients with complex tax affairs, including large corporates and high-net-worth individuals, due to the increased risk.

“The measures would drive many professional tax advisers out of the market and impose considerable extra burdens on the vast majority of tax professionals who help support good tax compliance,” the ICAEW stated.

Legal Profession Echoes Warnings

The Law Society has echoed many of ICAEW’s concerns, particularly the broad and vague drafting. The use of the word ‘interaction’ is seen as a catch-all that could inadvertently bring in professionals such as conveyancing solicitors who are not tax advisers.

In its response to the consultation, the Law Society said: “The draft legislation is cast too widely and risks imposing significant new burdens and uncertainty on conscientious advisers (particularly sole practitioners, small firms, and large international firms) without improving outcomes for taxpayers. The measures are likely to reduce choice for taxpayers, with advisers or firms where tax advice is a small part of their business choosing not to provide services that relate in any way to tax due to the extra compliance burden imposed.”

They added: “The definitions of ‘tax adviser’ and ‘interaction with HMRC’ are so broad that many legal professionals who do not hold themselves out as tax specialists, or who are not in any real sense tax advisers, would be caught.”

Looking Ahead

With the profession united in opposition, the government faces mounting pressure to rethink its proposals. Both ICAEW and the Law Society are urging ministers to narrow the scope of the legislation, clarify definitions, and focus enforcement on actual misconduct, not honest mistakes or incidental interactions. As the April 2026 implementation date approaches, the debate is set to intensify, with the future of UK tax compliance and professional advice hanging in the balance.