MTAR30400 - Sanctions and safeguards: financial penalties for prohibited interactions
Overview
HMRC will issue a financial penalty to a tax adviser, or, where appropriate, a relevant individual, where they interact with HMRC on behalf of clients whilst subject to a compliance notice.
Financial penalties form part of the sanctions framework for tax adviser registration. Their purpose is to provide an additional consequence where a tax adviser or relevant individual continues to undertake prohibited interactions with HMRC after receiving a compliance notice. You can find out more about compliance notices at MTAR30200.
The financial penalties provision is set out in sections 234 and 235 of the Finance Act 2026.
Penalties for prohibited interactions
Where a tax adviser is subject to a compliance notice and HMRC identifies a prohibited interaction, a financial penalty will be issued.
The standard penalty is £5,000 for each prohibited interaction.
The amount of the penalty increases to £10,000 where, at the time of the prohibited interaction:
- the tax adviser or relevant individual has been issued four or more £5,000 financial penalties during the two-year period ending on the date of the interaction; or
- the tax adviser or relevant individual was subject to an ineligibility order (see MTAR30500).
A separate penalty may be charged for each prohibited interaction.
A summary of the financial penalties framework can be found on GOV.UK.
Penalties issued to tax advisers and relevant individuals
A financial penalty may be imposed on a tax adviser or to a relevant individual, depending on the circumstances of the prohibited interaction.
Where an authorised officer of HMRC considers that a prohibited interaction is attributable to a particular relevant individual, the penalty may be imposed on that relevant individual.
Where an authorised officer does not consider that the prohibited interaction is attributable to a relevant individual, the penalty may be imposed on the tax adviser.
The penalty history of the tax adviser and the penalty history of a relevant individual are considered separately when determining whether a £5,000 or £10,000 penalty amount applies.
Reasonable excuse
A tax adviser or relevant individual is not liable to a financial penalty under sections 234, 235, or 238 of the Finance Act 2026 if they can satisfy an authorised officer of HMRC, or the tribunal on appeal, that they had a reasonable excuse for the contravention.
Whether a reasonable excuse exists will depend on the particular facts and circumstances of the case. HMRC will consider all relevant evidence before reaching a decision.
Where a person had a reasonable excuse for a contravention, but the excuse subsequently ceased to apply, they will continue to be treated as having a reasonable excuse provided that the contravention is remedied without unreasonable delay after the excuse ended.
For more information about what constitutes a reasonable excuse, see CH160200.
Opportunity to make representations
Before imposing a financial penalty for a prohibited interaction, HMRC must:
- notify the tax adviser or relevant individual that HMRC considers them liable to a penalty; and
- give them 30 days, beginning with the date of the notification, to make representations to HMRC.
An authorised officer may extend the period for making representations by giving notice to the tax adviser or relevant individual.
HMRC will consider any representations received before deciding whether to impose a financial penalty.
If, after considering any representations received, HMRC decides to impose a penalty, HMRC will issue a notice of assessment.
Assessment of financial penalties and time limits
The assessment and collection of penalties are governed by sections 241 and 242 of the Finance Act 2026.
A notice of assessment may relate to one or more prohibited interactions.
A penalty assessment under sections 234 or 235 must be made within 12 months beginning with the day on which the person became liable to the penalty.
A penalty assessment under section 238 must be made within 12 months beginning with the day on which the contravention first came to the attention of HMRC.
The notice of assessment will specify:
- the date on which it is issued;
- each contravention in respect of which the penalty is assessed;
- the amount of the penalty; and
- the period within which an appeal may be made.
A penalty becomes due and payable 30 days after the date on which the notice of assessment is issued.
Double jeopardy
A person may not be charged more than one penalty under sections 234 and 235 in respect of the same prohibited interaction.
This safeguard ensures that the same conduct cannot give rise to multiple financial penalties under the prohibited interaction penalty provisions.
Cancellation of penalties
Where a penalty is subsequently set aside or cancelled, it is to be treated from that time as if it was not assessed on the tax adviser or relevant individual.
When determining whether a person has previously been issued four or more £5,000 penalties for the purposes of the £10,000 penalty threshold, any penalty that has subsequently been cancelled is disregarded.
For example, if a tax adviser has received four £5,000 penalties but one of those penalties is later cancelled following a review or appeal, the adviser is treated as having received three £5,000 penalties for the purposes of sections 234 and 235