Contrary to widespread concern, the UK government’s proposed changes to HMRC’s civil information powers do not create a blanket right to inspect taxpayers’ AI conversations. The reforms cover two separate areas: Schedule 36 of the Finance Act 2008, which governs civil information and inspection powers, and section 114 of the same Act, which modernises the legal treatment of computer records. Together, they bring the rules in line with how tax information is now created, stored and processed through software, automated systems and cloud services.
The Relevance Threshold Still Applies
HMRC needs an existing legal basis and a direct connection to a tax figure before it can request anything.
Under the revised powers, HMRC may seek information about how a tax figure was produced. That request still requires a lawful basis. The operative word is “relevant”: the information must relate to checking a taxpayer’s tax position, not to any broader curiosity about how that taxpayer uses AI tools.
When AI Records Actually Become Fair Game
Taxpayers who use AI as part of a documented accounting workflow face more direct exposure than those asking general questions.
The distinction matters most for anyone using AI tools to classify expenses, calculate deductions or generate supporting schedules. If prompts, outputs or system logs contributed to a figure on a submitted return, those records may fall within scope of an appropriately authorised information notice. HMRC’s official material does not specifically mention ChatGPT histories or chatbot prompts, but the underlying principle covers any digital record used to produce a relevant tax figure.
HMRC has stated that the reforms are not designed for general surveillance of AI use. According to the department, the changes are “about updating our existing information powers to reflect how tax information is now stored and processed digitally,” and the department “can only request information where we already have a lawful basis to do so.”
Software Providers and Cloud Services Are in Scope Too
Third parties that hold or manage relevant tax information could receive notices directly, creating a governance question for businesses using AI-enabled accounting platforms.
Software providers, cloud-service companies and financial institutions that hold or manage information relevant to a taxpayer’s affairs could also receive HMRC information notices. That creates a governance question for any business running tax workflows through accounting platforms powered by AI. Know what records your provider retains, where they are stored, and whether the underlying calculations can be explained clearly.
Timing and the Cost of Non-Compliance
Finance Bill 2026-27 carries the changes, with Royal Assent as the legally operative trigger.
The reforms take effect on and after the date Finance Bill 2026-27 receives Royal Assent; that is the legally operative date rather than any standalone calendar deadline. Penalty levels vary depending on the type of information notice issued and should be confirmed against the applicable HMRC guidance for the specific notice type.
Responsibility Stays With the Filer
AI tools do not transfer legal accountability for a tax return’s accuracy to the software or its provider.
Regardless of whether software or an AI assistant produced the figures, the taxpayer or business remains accountable for what is submitted to HMRC. Seb Maley, chief executive of tax consultancy Qdos, observed that “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.” AI-generated guidance is a starting point, not a substitute for verified professional advice.
The Audit-Trail Problem
A black-box result is convenient until HMRC asks how you arrived at the figure.
The practical risk is not that HMRC will seek out casual chatbot conversations. It is that a taxpayer submits AI-assisted figures with no independent record of how those figures were reached. Keep source documents and calculations in records that exist independently of any AI interface, and ensure your accounting trail can support a straightforward explanation of every figure submitted.
