HMRC Eyes the Tax Bot’s Workings

The Independent reports that changes to the law on computer records, expected to take effect in May, would allow HMRC to inspect how relevant tax figures were generated, including through software and automated systems. The legal hinge is not “HMRC can read everyone’s chatbot.” It is narrower than that, and more consequential. HMRC says it wants power to ask how a figure was produced when it already has a lawful basis to seek information.

That distinction is doing a lot of work.

HMRC said it wants information on “how relevant tax figures have been produced including where they are generated using software or automated processes” to support more accurate reporting and strengthen compliance. In ordinary language: if a taxpayer used software or an AI-assisted workflow to arrive at a tax figure, HMRC may want the recipe as well as the result.

The awkward part is where that recipe lives. If the calculation process included prompts, chatbot exchanges, or other records held by a third-party AI provider, those providers could be asked to share taxpayer information. That does not establish that HMRC will routinely demand chat logs from tools such as ChatGPT, Claude or Copilot. It does mean the boundary between a tax record and a working exchange with software is getting thinner.

Third parties that fail to respond to HMRC information requests can face a £300 fine, according to the report. Taxpayers who do not report inaccuracies can be liable for penalties of up to £3,000. The incentive here is fairly plain. If software providers are now part of the evidentiary chain, they may have reason to preserve more of it, and taxpayers may find that “the system handled it” is not a particularly durable answer.

HMRC’s own public line is less grand than the privacy argument now gathering around it. A spokesperson said the update reflects how tax information is stored and processed digitally and “is not about going through everyone’s use of large language models.” HMRC added that it can request information only where it already has a lawful basis.

Anne Strickland of the Taxpayers’ Alliance called the prospect of requesting AI conversations “deeply intrusive.” Fair enough. But the state’s interest here is not really in novelty. It is in auditability. Once taxpayers rely on black-box tools for regulated calculations, HMRC is unlikely to be satisfied with being handed the answer and asked not to peek behind the curtain.