On 23 October 2026, HMRC published new guidance on how legal professional privilege interacts with its anti-avoidance powers. On its face, this is reassuring: privilege is confirmed, not eroded. Look past the headline, though, and the guidance points to something advisers should take more seriously. In the context of enabler penalties, privilege is not a shield. An adviser cannot rely on privileged communications to rebut evidence that they were an enabler, and getting that wrong carries personal financial, regulatory and even criminal consequences. Set against a visibly more targeted HMRC approach to the advisers and agents behind avoidance schemes, that combination deserves close attention.

What Has Stayed the Same

HMRC's new guidance on how privilege interacts with its anti-avoidance powers mostly restates the law as it already stood. 

Legal advice privilege attaches to confidential lawyer-client communications made for the purpose of giving or obtaining legal advice, whether or not litigation is on the horizon. 

HMRC has confirmed that its information notices cannot be used to demand privileged material, and that its anti-avoidance legislation does not override the principle. 

The iniquity exception still requires HMRC to prove, on the balance of probabilities and with real evidence rather than mere suspicion, that a document was created in furtherance of fraud, crime or equivalent underhand conduct, before privilege gives way. 

The Enabler Declaration

The real substance of this update sits somewhere else entirely: enabler penalties under the Disclosure of Tax Avoidance Schemes (DOTAS) and Promoters of Tax Avoidance Schemes (POTAS) rules, and specifically the declaration mechanism at paragraph 44 of Schedule 16 to the Finance (No. 2) Act 2017. 

HMRC's guidance explains how lawyers can make declarations to show that they, or their firms, did not enable abusive tax arrangements, in situations where the privileged communications that might otherwise prove the point cannot be put forward as evidence. 

Those declarations need to be backed by proper enquiries and by the information actually available, not just asserted. HMRC is also clear that businesses need to weigh up everything available to them when working out whether they were involved in enabling abusive arrangements, and that where non-privileged information already points to someone being an enabler, they cannot lean on privileged communications to say otherwise. 

Get the declaration wrong, and the consequences can include financial penalties for everyone involved, including the lawyer who signed it off, with further regulatory or criminal exposure possible too.

What This Means for Lawyers

Lawyers must now consider whether they could pull together and document a defensible basis for saying they were not an enabler, using only material that does not depend on their client ever agreeing to waive privilege.

An adviser who is confident their advice is privileged can end up feeling falsely reassured and do nothing further. But given the impact of these penalties, it may be prudent for advisers to instead check whether their own files, independent of anything privileged, make the level of their involvement clear. 

And because privilege belongs to the client, and a lawyer can only waive it with that client's consent, you cannot necessarily plug the gap later by asking the client to release the file. That route might simply not be open when you need it. 

Better to close the gap now, with records you control outright.

What This Means in Practice

This guidance also lands against a backdrop of HMRC taking a more targeted, assertive approach toward the advisers and agents it regards as facilitating avoidance and evasion, rather than focusing solely on the taxpayers who use the schemes.

If you are involved in, or advising on, DOTAS or POTAS-related exposure, there are three key takeaways from this recent update:

A declaration is a formal submission to HMRC in its own right. It needs to be backed by appropriate enquiries and the information available, and it deserves the same care in preparation, review and documentation as any other substantive filing.

The evidence that actually matters here is the non-privileged kind: engagement letters, scope documents, internal risk sign-offs, any contemporaneous record of concerns raised or instructions turned down. 

If HMRC already holds non-privileged information suggesting enabling conduct, a declaration will not be rescued by pointing to privileged advice that supposedly says otherwise. At that point, treat it as a dispute about the facts, not as a privilege argument to be won on principle.

Conclusion

The message from this guidance is straightforward, even if its implications are not. Privilege protects confidential advice; it does not, and was never going to, protect an adviser from an enabler penalty. As HMRC sharpens its focus on the advisers and agents behind avoidance schemes, that distinction is not academic. Advisers who wait until they are under scrutiny to find out whether their own records would stand up on their own may find the question asked at the worst possible moment.
 

For more information, please get in touch with a member of Edwin Coe's Tax team.