- Proposed legislation would allow HMRC to examine a wider range of digital information held by taxpayers and third parties
- ChatGPT prompts and AI-generated working papers could be relevant if they form part of a tax calculation
- HMRC says the changes do not give it blanket access to private chatbot histories
HM Revenue and Customs (HMRC) could seek access to AI chatbot conversations and digital records used to prepare tax calculations under proposed changes to its information-gathering powers.
The proposals would allow the tax authority to examine a wider range of information held by taxpayers, businesses and third-party providers, including software companies and platforms managing digital records.
The changes are part of the Finance Bill 2026-27 and are intended to update existing legislation to reflect how financial information is created, stored and processed through automated systems and cloud-based services. They have not yet become law and are expected to take effect following Royal Assent.
The possibility that conversations with tools such as ChatGPT, Microsoft Copilot and Claude could fall within the expanded scope has raised concerns among tax advisers and privacy campaigners.
Nimesh Shah of accountancy firm Blick Rothenberg said the most significant issue was HMRC's intention to obtain information about how tax figures had been produced using software or automated processes.
He said this raised questions about whether prompt histories, AI-generated working papers, chatbot conversations used to prepare tax calculations and audit trails within AI agents could become disclosable.
Could HMRC demand access to your AI conversations?
HMRC already has powers under Schedule 36 of the Finance Act 2008 to issue information notices requiring taxpayers and certain third parties to provide documents or information needed to check a person's tax position.
The proposed changes would update Section 114 of the same legislation, which deals with computer records. The definition would be broadened to cover information held in modern digital systems rather than being limited to traditional computer records.
Importantly, Section 114 does not create a separate power allowing HMRC to access any digital information it chooses. It supports existing information-gathering powers under Schedule 36, which still require a lawful basis for requesting material.
This could become relevant when taxpayers use AI tools to prepare tax calculations, assess deductible expenses or organise business accounts. If HMRC investigates the figures submitted, it may seek information explaining how those calculations were produced.
Seb Maley, chief executive of tax insurance provider Qdos, in a news report quoted as saying, "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. It wants to know not just what tax figure a system produces, but how it arrived at that number."
The proposed changes could also affect third-party providers holding relevant information on behalf of taxpayers. This means the issue is not limited to individuals being asked to supply their own records. Software and cloud-service providers could also face requests where the information falls within HMRC's existing legal powers.
However, the proposals do not mean that every conversation with an AI chatbot will automatically become available to the tax authority.
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."
What happens if taxpayers refuse to provide information?
HMRC uses Schedule 36 notices to obtain information from individuals, businesses and third parties during tax compliance checks. Requests must meet statutory requirements, including that the information is reasonably required to establish a taxpayer's position.
Taxpayers can challenge notices in certain circumstances, including where they do not hold the requested information or where HMRC cannot demonstrate that it is reasonably needed for an investigation.
Failure to comply with a valid information notice can result in an initial penalty of £300. Further daily penalties may apply in some circumstances. Separate penalties of up to £3,000 can apply for certain inaccuracies or failures to comply with statutory requirements.
The proposals come as HMRC seeks to reduce the estimated £59bn tax gap, the difference between the tax expected to be collected and the amount actually received.
The government is also expanding its ability to recover unpaid tax. From July 2029, HMRC is due to gain powers to recover certain low-value tax debts directly from bank accounts where taxpayers have repeatedly failed to engage with the authority.
The growing use of AI in financial administration adds another dimension to the debate. A survey by the Administrative Burdens Advisory Board in September found that more than 30 per cent of businesses had used AI tools such as ChatGPT or Copilot to seek answers to tax questions. Around six in 10 of those users said they had found the information they needed.
Anne Strickland of the Taxpayers' Alliance said requesting private AI conversations "would be a deeply intrusive overreach by the taxman".
She added: "HMRC already has sweeping powers, and expanding them further risks trampling over the privacy of ordinary Britons."
The central question will be how HMRC applies the expanded powers once they become law. While the authority says it wants to understand how digital tax information is generated, the possibility of accessing AI-assisted working records raises questions about the boundary between legitimate tax investigations and personal privacy.
For taxpayers and businesses using AI to manage their finances, the proposed changes are a reminder that digital records created during tax preparation may carry obligations beyond the original conversation with a chatbot.
