HMRC proposes expanded powers to inspect AI chat histories in tax investigations

UK taxpayers who use AI tools such as ChatGPT, Claude and Microsoft Copilot to prepare tax returns could face requests to disclose relevant chatbot conversations under proposed changes to HM Revenue and Customs (HMRC) information powers.

The reforms are included in the Finance Bill 2026–27 and remain subject to parliamentary approval and Royal Assent. The government published draft legislation in July 2026, with its technical consultation closing on September 7.

Proposed changes to information powers

The changes would update Section 114 of the Finance Act 2008 and Schedule 36, which govern access to computer records and tax information. HMRC says the changes are intended to modernise existing information powers to reflect how tax information is now stored and processed digitally.

Under the proposals, HMRC could request information where it already has a lawful basis to do so. An HMRC spokesperson 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."

The source material states that relevant tax-related conversations could potentially be requested if they formed part of a taxpayer’s accounting or calculation process. However, the proposals do not establish an unrestricted right for HMRC to access private AI accounts.

Who could be affected

The changes could be relevant to self-employed workers, landlords, accountants and small businesses that increasingly rely on AI-powered software. For example, a business owner might use ChatGPT to identify deductible expenses, while an accountant could use an automated platform to prepare tax computations.

The Administrative Burdens Advisory Board found that more than 30% of surveyed businesses had used AI tools such as ChatGPT or Copilot to answer tax questions. Around six in ten users reported finding the information they needed.

Penalties and privacy concerns

Taxpayers who fail to comply with valid information notices may face an initial £300 penalty. Separate penalties of up to £3,000 can apply to certain failures involving inaccuracies.

The TaxPayers’ Alliance has warned that requiring disclosure of personal AI communications could represent an intrusion into taxpayers’ privacy. Anne Strickland, of the Taxpayers’ Alliance campaign group, said it would be "deeply intrusive" to request AI conversations. She told the Telegraph: "HMRC already has sweeping powers, and expanding them further risks trampling over the privacy of ordinary Britons."

Schedule 36 information notices can be challenged in circumstances where requests exceed statutory requirements or seek information that is not reasonably needed to check a person’s tax position.

Why it matters

The reforms form part of the government’s efforts to modernise tax administration and reduce the estimated £59bn tax gap. HMRC argues that its existing legislation must reflect developments in cloud accounting, automated bookkeeping and AI-assisted calculations to ensure tax investigations remain effective. The legislation does not prohibit taxpayers from using ChatGPT or other AI platforms for tax-related purposes, but individuals and businesses remain responsible for the accuracy of their returns regardless of whether calculations were completed manually, through accounting software or with AI assistance.

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Sources

• beinsure.com: HMRC AI chatbot tax rules 2027: What UK taxpayers need to know about ChatGPT, Claude and Copilot
• independent.co.uk: Can HMRC read your ChatGPT history? Here’s what the new rules mean | The Independent

This article was drafted with AI assistance and checked against the sources above. Company claims are reported as claims. Cover image is AI-generated.