HMRC's new sanctionable conduct regime and what it means for tax valuations

HMRC's new "sanctionable conduct" regime has important implications for valuations used for tax purposes.

From April 2026, valuers are expressly included within the scope of a new framework that gives HMRC the power to impose substantial penalties where they conclude that a tax adviser, including a valuer, has intentionally facilitated a loss of tax revenue. While the regime is not aimed at genuine valuation disagreements or differences in reasonable professional judgement, it reinforces the need for robust, evidence-based valuations which are supported by clear assumptions and are appropriately documented.

Why this matters

Many tax positions depend on an estimate of value. Across a broad range of tax areas, including capital gains tax, inheritance tax, corporation tax and employment-related securities, valuation conclusions can have a direct impact on whether a tax charge arises and the amount of tax payable. They are also often central to HMRC enquiries and disputes.

That is why HMRC's new sanctionable conduct regime has important implications for valuers. It expressly brings valuers within scope and gives HMRC the power to impose penalties where an officer concludes that the rules have been breached.

What has changed?

A new statutory regime governing "sanctionable conduct" by tax advisers came into force on 1 April 2026 under sections 250 to 253 and Schedule 22 of the Finance Act 2026, which amended Schedule 38 of the Finance Act 2012. The changes replaced the previous "dishonest conduct" test with a focus on whether an adviser intended to bring about a loss of tax revenue, regardless of whether a loss ultimately occurred. HMRC has also published updated guidance in its Compliance Handbook (see CH176000).

The most significant change is that HMRC no longer needs to establish dishonesty. Instead, the legislation focuses on whether an adviser has acted with the intention of bringing about a loss of tax revenue.

At the same time, the definition of a tax adviser has been expanded. It now includes any individual or organisation that assists others with their tax affairs in the course of business. HMRC's guidance specifically identifies anyone providing valuations for tax purposes as falling within scope.

The removal of the dishonesty requirement and the broader focus on intention have prompted concerns from professional bodies, including the ICAEW, about where the line should be drawn between deliberate conduct and legitimate professional judgement. While HMRC has made clear that sanctionable conduct means "deliberately doing the wrong thing" and "does not include tax advisers who make mistakes while trying to do the right thing", the changes reinforce the importance of rigorous, evidence-based advice wherever tax outcomes depend on professional judgement.

Implications for valuers

A valuer may fall within scope even where instructed indirectly through an accountant, solicitor or other professional adviser. In some circumstances, reports prepared for an alternative purpose may also be subject to the regime where the valuer knows they are likely to be used in connection with a client's tax affairs.

Importantly, HMRC challenging a valuation is not, by itself, evidence of sanctionable conduct. What is likely to matter is the overall integrity of the valuation process.

In practice, the strongest protection against potential challenge under the new regime is likely to be a valuation process that is demonstrably independent, objective and evidence-based. Factors that may attract greater scrutiny include adopting a client-provided "target" value without appropriate challenge, relying on assumptions or forecasts that support a desired tax outcome while disregarding contrary evidence, or selectively choosing comparable transactions or companies without adequately explaining adjustments. Similarly, the application of minority, marketability, liquidity or control discounts without a clear evidential basis, the omission of material facts, or the failure to distinguish between information available at the valuation date and hindsight when preparing retrospective valuations may expose a valuer to scrutiny, even where such shortcomings are unintentional.

Equally important in protecting a valuer from challenge under the regime is ensuring that the valuation date, purpose, statutory basis, key assumptions and any limitations are clearly documented.

Enforcement and penalties

Where HMRC concludes that a valuer has engaged in sanctionable conduct, the consequences can be significant. The size of the penalty is determined by reference to the potential loss of tax revenue and can reach £1 million for a first offence, up to £5 million for repeat cases and, in certain circumstances, may be uncapped.

Where a penalty exceeds £7,500, HMRC is generally required to publish details of the adviser, the penalty and the conduct concerned on GOV.UK. Publication creates a public record of both the penalty and the conduct concerned. For many professional advisers, the reputational impact of public naming may be as significant as the financial penalty itself.

How Touchstone can help

While the new regime is not aimed at genuine differences of professional judgement, it reinforces the importance of independence, objectivity and a clear evidential basis wherever tax outcomes depend on valuation. An independent, well-reasoned valuation supported by a clear audit trail is likely to constitute the strongest defence against challenge.

Touchstone Advisory provides independent valuation advice across a broad range of tax contexts where value is central to the tax analysis, including capital gains tax, inheritance tax, employment-related securities and stamp duty.

We have extensive experience in valuing private companies and shares, intellectual property, real estate and other business assets across a wide range of sectors. We work closely with taxpayers, accountants, solicitors and other professional advisers on both compliance and contentious valuation matters.

Whether supporting in the context of a tax filing, a transaction or an HMRC enquiry, we help taxpayers and their advisers to navigate complex valuation issues and engage with HMRC where required. To discuss a valuation matter, please get in touch.