HMRC is set to gain the ability to examine how tax figures are produced, including the software, automated systems, and potentially AI tools behind them under proposed changes expected to take effect in 2027.
The reforms would modernise Section 114 of the Finance Act 2008, allowing HMRC to access, check and inspect digital tax records, including those managed by third-party software providers.
The changes are subject to the Finance Bill receiving Royal Assent.
As per tax insurance provider Qdos, the proposals go beyond giving HMRC access to final figures. Where the authority already has a legal right to request information, it would be able to examine how those figures were generated, including the software and automated processes involved.
It was initially released in July 2026, with the technical consultation closing in September.
According to an article in The Telegraph, under the Budget Bill, the definition of the digital information which HMRC can ask for would include “any relevant thing,” which implies that third-party providers such as AI platforms and software could be asked to provide taxpayer information.
There is some uncertainty as to whether prompt history, AI working papers, and chatbot communications will become disclosable.
Seb Maley, chief executive of Qdos, said: “AI and automation might make managing tax affairs easier on the face of it, but it doesn’t remove responsibility from the taxpayer or business liable for tax. Ultimately, if something goes wrong, these parties will face questions from HMRC.”
An HMRC spokesman said: “This is about updating our existing information powers to reflect how tax information is now stored and processed digitally. It is not about going through everyone’s use of large language models. We can only request information where we already have a lawful basis to do so.”
Taxpayers who fail to respond to HMRC information requests face an initial £300 fine, with up to £3,000 for unreported inaccuracies.
