Tax authority gains expanded powers to review digital tax processes

Currently, HMRC can request computer records during tax investigations. The updated legislation will permit the authority to scrutinize the methods behind tax calculations, potentially requiring AI platforms and software companies to share taxpayer data.

Failure to comply with HMRC’s information requests can result in a £300 fine for third parties. Taxpayers who fail to report inaccuracies may face penalties of up to £3,000.

According to Seb Maley, CEO of tax insurance provider Qdos, HMRC’s move is a response to the increasing use of AI in tax management. “As more taxpayers and businesses put their trust in AI to help manage their tax affairs, HMRC is making sure it isn’t left behind,” Maley stated. He emphasized the importance of selecting reliable technology and maintaining responsibility for tax obligations, even when using automated systems.

HMRC’s stated goal is to obtain information on “how relevant tax figures have been produced including where they are generated using software or automated processes to support more accurate tax reporting and strengthen compliance.” This raises concerns about the potential disclosure of AI interaction histories and chatbot conversations used in tax preparation.

Anne Strickland, of the Taxpayers’ Alliance, criticized the proposal as “deeply intrusive,” arguing that it could infringe on the privacy of UK citizens. She told the Telegraph that HMRC already possesses extensive powers.

A spokesperson for HMRC clarified that the changes are intended to modernize existing information-gathering capabilities and are not aimed at monitoring individual usage of AI tools. They asserted that information requests are only made when a lawful basis exists.