Policy paper

Prohibiting promotion of certain tax avoidance arrangements

Published 30 October 2026

1. Overview

This guidance describes the legislation in sections 159 to 165 of the Finance Act 2026 (FA26), which introduces new rules that prohibit the promotion of certain tax avoidance arrangements (POP). The POP came into force on 19 May 2026.

As stated by the Economic Secretary to the Treasury, Lucy Rigby MP, on Tuesday 3 February 2026: “these clauses are about targeting those who continue to promote tax avoidance; 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.”

The legislation makes it an offence to promote arrangements that meet either of the following:

• they 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 (read section 3.1 ‘Arrangement with no realistic prospect of resulting in a tax advantage’)
• they fall within a type specified in regulations made by HMRC (read section 3.2 ‘Arrangements specified by regulations’)

The rules also clarify what we mean by ‘promotion’, read section 4 of this guidance to find out more.

1.1 Penalties and offences

A person who commits an offence by breaching the prohibition can be subject to either a summary conviction or a conviction on indictment and may face criminal sanctions, including fines and up to 2 years’ imprisonment on conviction.

Civil penalties may be charged up to the sum of £1 million plus £5,000 per participant.

The legislation also:

• confirms that penalties will carry interest
• prevents penalties being charged in respect of anything for which a person has already been convicted of a criminal offence
• links these penalties to the joint and several liability rules for directors and shadow directors

2. Definitions

2.1 Authorised officer

An authorised officer (AO) is a person that has been authorised by HMRC Commissioners in accordance with section 165 of the Finance Act 2026.

2.2 Tax advantage

The definition of ‘tax advantage’ is at section 165 of the Finance Act 2026 and is the same as that used elsewhere in the promoters of tax avoidance schemes (POTAS) legislation and includes:

• relief or increased relief from tax
• repayment or increased repayment from tax
• avoidance or reduction of a charge to tax or an assessment to tax
• avoidance of a possible assessment to tax
• deferral of a payment of tax or advancement of a repayment of tax
• avoidance of an obligation to deduct or account for tax

2.3 Arrangements

For the purposes of this legislation, arrangements are any agreement, scheme arrangement or understanding of any kind whether or not legally enforceable involving one or more transactions and includes a proposal for arrangements.

2.4 Marketed or likely to be marketed

In arriving at HMRC’s view on whether the arrangements are likely to be marketed as a means by which a person may seek a particular tax advantage, there is no requirement to identify a person either who has marketed the scheme or who has been the recipient of the marketing.

Where the main advantage, or one of the main advantages, of the arrangements is a tax advantage, it is HMRC’s view that it is reasonable to infer that the arrangements are likely to be marketed on that basis, whether or not they have actually been so marketed, unless the facts demonstrate otherwise.

There is no need for the arrangements to have been marketed at the time an officer of HMRC considers that there has been a breach of section 159(1) of the Finance Act 2026. Evidence of marketing will strengthen any case, but it is not necessary for the marketing itself to be identified.

3. Prohibited arrangements

There are 2 categories of arrangements that, as a result of this legislation, a person will be prohibited from promoting. It is possible for arrangements to fall within both categories. Arrangements specified in regulations may also have no realistic prospect of providing the marketed tax advantage.

A person will be promoting prohibited arrangements (read section 4, ‘What we mean by promotion’) even if they are not aware that the arrangements are prohibited.

3.1 Arrangement with no realistic prospect of resulting in a tax advantage

If the arrangements have been, or are likely to be, marketed as a means by which a person may seek a particular tax advantage, and there is no realistic prospect that the arrangements will result in the tax advantage, the promotion of those arrangements will be prohibited under this legislation.

‘No realistic prospect’ is not defined in the legislation. HMRC views the following examples as indicators that arrangements have no realistic prospect of resulting in the tax advantage:

• arrangements with facts which are the same or substantially similar to those where there is an existing judicial ruling from any court applying legislation that would prevent the scheme from being effective at the time at which the arrangements are being promoted

• arrangements where the intended tax advantage relies on users not fulfilling an obligation as doing so would make no economic sense, for example, users entering into a loan agreement which they do not genuinely expect to pay

• arrangements which rely on a prospect of success that has been based on factual assertions or legal opinion which are in HMRC’s view entirely without merit or are contradicted by documentation

An Extra Statutory Concession (ESC) is a concession by HMRC under UK tax law whereby taxpayers can mitigate their tax liabilities even though the relevant allowances would not ordinarily be allowed under the terms of the tax legislation.

HMRC will not grant these concessions where the taxpayer is attempting to use the concession for tax avoidance.

If tax avoidance arrangements rely on an ESC to access reliefs or mitigate a tax liability that could not be mitigated or relieved without the ESC, it is HMRC’s view that those arrangements will have no realistic prospect of success and may fall under the POP.

3.2 Arrangements specified by regulations

Promotion of arrangements that have been specified in regulations introduced by the Commissioners will be prohibited under this legislation. These regulations will take the form of a Statutory Instrument. The Commissioners will introduce regulations to specify arrangements of a kind that in their reasonable opinion:

• have been, or are likely to be marketed as a means by which a person may seek a particular tax advantage
• are unlikely to result in the tax advantage
• are likely to cause harm to participants

In determining whether the above tests are met, all relevant facts will be considered by the Commissioners who will be advised by operational, legal and technical officials.

The Commissioners can decide what characteristics of the arrangements it would be appropriate to include in the regulations. Examples of the characteristics that may be specified are provided at section 159(4) of the Finance Act 2026. This list is not exhaustive and includes:

• some or all of the steps to be taken by participants or other persons
• the tax advantage sought
• the marketing
• characteristics of participants

The regulations may also include examples or illustrations of how the arrangements may work.

When regulations are made, they will be published on the Legislation.gov.uk website. Links to regulations will also be added to this section when appropriate. The list of regulations listed on this guidance may not be exhaustive and the regulations will still have an effect if they are not included in this guidance.

Speaking on the power to make regulations in the sixth sitting of the Finance Bill, Economic Secretary to the Treasury Lucy Rigby stated: “The power in clause 156 will allow HMRC to make regulations only where arrangements have been or are likely to be marketed, where they are unlikely to work and where they are likely to cause harm to taxpayers. That limits HMRC’s scope to proscribe arrangements. The power is not at all intended so that HMRC can ban advisers from recommending tax positions they think are right, based on all the facts of the law, but with which HMRC disagrees.”

3.2.1 Arrangements likely to cause harm to participants

Potential indicators that the arrangements are likely to cause harm to participants are provided in section 159(3) of the Finance Act 2026. This list is non-exhaustive and includes:

• a large number of participants
• participants that are not independently advised
• participants with otherwise straightforward tax affairs
• mass-marketing
• standardised implementation documents
• promoters that are unknown to, or not able to be contacted by participants

It is not a requirement for all, or any, of these factors to be present in the arrangements for the Commissioners to conclude that the arrangements are likely to cause harm to participants.

There are some financial and tax products that would meet most of these indicators. Where these products have been used correctly, as Parliament intended, they will not be in scope of the legislation.

3.2.2 How the regulations will be made

The regulations introduced by the Commissioners will be made by Statutory Instrument. Once the Statutory Instrument has been made, it will be laid before the House of Commons. The instrument then must be approved by the House of Commons within 28 days of being laid.

The regulations can come into effect soon after the Statutory Instrument is laid before the House of Commons. From this date anyone promoting the arrangements specified in the regulations will be in breach of section 159(1) and liable to the relevant sanctions.

If the Statutory Instrument is not approved by the House of Commons within 28 days, the regulations will cease to be law.

The 28-day period does not include any whole days where Parliament is dissolved or prorogued or if the House of Commons is adjourned for more than 4 days.

If the Statutory Instrument is not approved within the 28 days, the Commissioners may introduce new regulations that relate to the same arrangements. Any breach that occurs during the 28-day period will not cease to be a breach as a result of the House failing to approve the legislation. Therefore, any action taken by HMRC in relation to that breach, even after the end of the 28-day period and including the issue of penalties, will not be invalidated by this failure.

4. What we mean by promotion

A person promotes arrangements if, in the course of business or with a view to monetary gain, they meet any of the following:

• communicate information with a view to encouraging another person to implement the arrangements or part of the arrangements
• make the arrangements available for implementation by another person
• in circumstances where the arrangements have been implemented by another person, organise or manage any aspect of the arrangements
• arrange for another person or persons to take any of these steps, either directly or indirectly

Monetary gain is not limited to simply receiving money. Monetary gain also includes:

• gifts
• the provision of, or being given access to assets
• other benefits that arise from the promotion of the activities

A person who provides goods or services that are used in relation to prohibited arrangements will not be considered to be promoting those arrangements, and sections 159 to 165 of the Finance Act 2026 will not apply to them, if both the following are met:

• the goods or services are provided on commercial terms
• the person does not know, and could not reasonably be expected to know, that those goods or services are being used in relation to prohibited arrangements

However, they could still receive a Promoter Action Notice (PAN) if the person to whom they are providing the goods or services is, or becomes, a certified promoter.

For example, a bank is not treated as a promoter simply because a promoter holds an account with it and scheme users’ money passes through that account.

A person who merely provides legally privileged advice or legally privileged information may not be a promoter of those arrangements. For more information, read HMRC’s view on how legal professional privilege interacts with anti-avoidance powers.

Examples of people who are promoting arrangements include but are not limited to a:

• financial adviser who emails the marketing material for the arrangements to their clients and encourages them to participate in the arrangements
• person who devises the arrangements and makes sure that the necessary contracts and paperwork are prepared

The filing of a tax return by an agent or tax adviser that has been prepared on the basis of figures that arise through the use of prohibited arrangements will not be classed as promotion providing the following conditions are met:

• filing of the return is the sole action taken by the tax adviser or agent
• agent or tax adviser is not related to the promoter or any other parties involved in the arrangements in any way

5. Sanctions

A person who breaches the prohibition is liable to a civil penalty and also commits a criminal offence, see sections 162 and 163 of the Finance Act 2026. Where HMRC suspects a person is in breach, a decision will be made whether the suspected breach can be addressed with civil compliance or whether it calls for criminal investigation. This will be decided in accordance with HMRC’s existing published guidance, read section 5.2 ‘Criminal offence’ of this guidance.

Criminal investigation will be reserved for cases where HMRC needs to send a strong deterrent message or where the conduct involved is such that only a criminal sanction is appropriate.

Being the subject of this legislation may also mean that the promoter no longer meets the requirements to register with HMRC as a tax adviser under the Mandatory Tax Adviser Requirements. Find more information in Check if and when you need to register as a tax adviser with HMRC.

5.1 Civil penalties

5.1.1 Penalty procedure

If HMRC consider that a person has promoted prohibited arrangements, an AO will consider whether a penalty should be imposed. Before a penalty can be imposed the AO must write to the person to let them know:

• that the AO considers that they are promoting arrangements that are prohibited and they are therefore liable to a penalty
• that they have 30 days to make representations to HMRC
• how to make representations

The promoter has a right of appeal against the decision to issue a penalty, read section 5.1.3 ‘Appealing against a Civil Penalty’ of this guidance.

The 30-day period begins on the date specified in the notice from the AO. Any representations made will be considered by the AO when determining whether a penalty should be imposed and the amount of the penalty.

Any penalty for which a person is liable must be paid within 30 days of the date of issue of the notice of determination (S100A Taxes Management Act 1970 (TMA)). If the penalty payment is made more than 30 days after the date of issue, interest will be payable from the date the penalty was due until the date of payment.

A person will not be liable to a civil penalty if they have already been convicted of an offence for the same action.

5.1.2 Calculating the penalty

If someone promotes arrangements that are prohibited, they will be liable to a penalty, unless they have been convicted of the same offence. The maximum penalty that can be charged is the sum of:

• £1 million
• £5,000 for each person who participated in the arrangements while the arrangements were prohibited

When determining the amount of a penalty, the AO must consider:

• the number of persons participating, or targeted to participate, in the arrangements
• the amount of tax that was likely at risk in connection with the arrangements
• whether and to what extent the person cooperated with HMRC
• whether the wrongdoing was repeated, or continued over an extended period

The AO may also consider all other relevant factors when determining the amount of a penalty.

Penalty example: company A

Company A sets up as an employment business in April 2026 with 150 employees. In September 2026 HMRC obtains evidence that company A’s arrangement breaches the Prohibition of Promotion of Certain Tax Avoidance Arrangements. HMRC identifies that company A has 90 employees.

HMRC writes to company A explaining that by promoting the arrangements they consider they have breached section 159(1)(a) of the Finance Act 2026. HMRC explains that they are considering charging a penalty but invite company A to make representations before deciding.

Company A responds by stating that the arrangements are now being wound down and that some employees have already been moved to compliant arrangements. Those remaining will be moved to compliant arrangements by October. They explain they had not received any previous communication from HMRC in respect of these arrangements and were not aware they had breached section 159(1)(a) of the Finance Act 2026.

HMRC identified that at the time of the breach there were 130 participants. The original figure of 150 employees is disregarded as the legislation was not in force at this time. The statutory maximum penalty for this breach is £1 million plus £5,000 per participant (£1 million + (130 × £5,000) = £1,650,000). HMRC has calculated that the likely tax at risk from these arrangements since the breach of the legislation is £100,000. HMRC has estimated that the fees obtained by company A since the breach are £50,000.

In considering imposing a penalty, the AO has given no mitigation to company A for being unaware that the arrangements have breached the legislation. Lack of knowledge of the legislation is not a mitigating factor. Neither is the fact that they received no prior communication from HMRC. There is no prior notice issued in respect of this legislation or warning letter involved. The AO has considered the fact that company A has engaged with HMRC and has explained that the arrangements will cease in October 2026.

The AO considers that there were 130 users after the legislation came into effect, the amount of tax at stake and the fees earned, and the fact that they are in the process of closing the arrangements and are not still marketing them. The AO determines that in consideration of all the circumstances the amount of penalty falling under section 162 (2)(a) should be £315,000 and for section 162 (2)(b) should be £300,000.

The AO imposes a penalty of £615,000, being the sum of section 162(2)(a) and (b).

If HMRC identify additional participants of the arrangements after the penalty is imposed, they may charge a further penalty based on the calculation at section 162(2)(b).

Penalty example: company B

In May 2026 company B started promoting arrangements which claimed to enable participants to reduce their tax burden. At that time there were 75 participants. In February 2027 regulations were made describing arrangements which had similar characteristics to those promoted by company B.

In June 2027 HMRC obtained evidence that company B was still promoting these arrangements and that there were 50 participants. HMRC writes to company B explaining that by promoting the arrangements HMRC considers that company B has breached section 159(1)(b) of the Finance Act 2026, as these are proscribed arrangements. HMRC explains that they are considering charging a penalty but invite company B to make representations before they decide on any penalty.

Company B responds explaining that they organised and managed the arrangements but do not consider that they have breached section 159(1)(b) of the Finance Act 2026.

HMRC conduct further investigations to establish the entities involved in promoting the arrangements. Despite delays from company B and little information being provided, HMRC identify that another company, company C, is directing company B’s activities and company B is acting according to company C’s direction.

HMRC identify that the breach took place in February 2027 (the date the regulations were in force). HMRC identified that at the time of the breach there were 50 participants. The original figure of 75 participants is disregarded as the regulations were not in place at this time. The statutory maximum penalty for this breach is £1 million plus £5,000 per participant (£1m + (50 × £5,000) = £1,250,000). HMRC has calculated that the likely tax at risk from these arrangements since the breach of the legislation is £250,000. HMRC has estimated that the fees obtained by company B since the breach are £100,000.

The AO considers that there were 50 participants after the legislation came into effect, the amount of tax at stake and the fees earned. The AO also considers the fact that company B did not co-operate fully with HMRC by not providing a clear account of those involved in the promotion of the arrangements. As a result, the AO determines, taking account of all the circumstances that the amount of penalty falling under section 162(2)(a) should be £300,000 and the amount under section 162(2)(b) is £200,000. The AO imposes a penalty of £500,000, which is the sum of section 162(2)(a) and (b).

Company C has also breached section 159(1)(b) of the Finance Act 2026 as they are a promoter of the arrangements according to section 160(d) of the Finance Act 2026. When determining the penalty for company C the AO considers the tax at risk, fees and number of participants. The AO also considers the fact that company C has attempted to hide their involvement in promoting the arrangements.

The AO determines that the amount of penalty for company C falling under section 162(2)(a) should be £400,000 and the amount under section 162(2)(b) is £225,000. The AO imposes a penalty of £650,000 which is the sum of section 162(2)(a) and (b).

If HMRC identify additional participants of the arrangements after the penalty is imposed, they may charge a further penalty based on the calculation at section 162(2)(b).

5.1.3 Appealing against a civil penalty

There is a right of appeal against the penalty determination under section 100B TMA 1970.

Accordingly, if a person who receives a notice of penalty determination disagrees with HMRC’s decision to charge a penalty they can appeal by writing to HMRC with the reason why they think the decision is wrong. They need to do this within 30 days of the notice telling them about the penalty determination. A late appeal may be made under section 49 TMA 1970.

Once an appeal has been made, HMRC will contact the promoter to try and settle the matter.

If an agreement cannot be reached, HMRC will write to the relevant person to explain the reasons why and set out their views.

That person can then either:

• have the matter reviewed by an impartial officer who works for HMRC Legal Group and who specialises in review work
• take their appeal to an independent tax tribunal

If the person disagrees with the outcome of the review by HMRC Legal Group, an appeal can be made to the tribunal. This must be done within 30 days of the date of the letter setting out the outcome of the review.

If an appeal is made, HMRC will not ask for the penalty to be paid whilst the appeal is being considered.

Find more information about appeal and review rights in:

• disagree with a tax decision or penalty
• appeals, reviews and tribunals guidance

5.1.4 If the promoter is a company

Where HMRC has imposed a penalty on a company, the liability for that penalty can be transferred to certain individuals within that company. The circumstances in which this can occur are explained in the joint and several liability guidance.

5.2 Criminal offence

It is a criminal offence for a person to promote a scheme that falls within section 159(1) of the Finance Act 2026.

A person who commits an offence can be subject to either a summary conviction or a conviction on indictment.

If a person is subject to summary conviction, they will be liable to:

• in England and Wales, an unlimited fine
• in Scotland and Northern Ireland, a fine of not more than the statutory maximum

If a person is subject to conviction on indictment, they will be liable to an unlimited fine, a potential prison term of up to 2 years, or both.

Any criminal action taken forward by HMRC will be in line with HMRC’s criminal investigation policy and will be subject to HMRC’s criminal investigation powers and safeguards.

HMRC’s criminal investigation powers and safeguards guidance explains that HMRC is not responsible for deciding if a case will be prosecuted. This decision is made by the independent prosecution authorities: Crown Prosecution Service (England and Wales), the Crown Office and Procurator Fiscal Service (Scotland) and Public Prosecution Service for Northern Ireland. Where a case is prosecuted, it will be for the courts to decide if an offence has been committed.

If a person is convicted of an offence, they will not be liable for a civil penalty for the same offence.

5.2.1 Criminal liability of responsible persons

This section applies where an offence under section 164 is committed by a body corporate or a partnership. If certain conditions are met, individuals in positions of responsibility within that organisation may also be criminally liable.

Who may be held liable

A responsible person may be personally liable for the offence if the offence was:

• committed with their consent or connivance
• attributable to their neglect

The terms consent, connivance and neglect are not defined in the Finance Act 2026. Generally, something done with the consent or connivance of someone normally means something done with their agreement or permission.

A ‘responsible person’ includes:

• for companies:

  • directors, managers, secretaries or similar officers, or anyone acting in such a role
  • shadow directors (within the meaning of section 251 of the Companies Act 2006)
• for limited liability partnerships (LLPs) or other bodies managed by members, members exercising management functions, or shadow members
• for partnerships, partners or anyone acting as a partner

Definition of a shadow member

A shadow member is a person whose instructions or directions the members of an LLP customarily follow. A person is not a shadow member merely because members act on that person’s professional advice.