UK taxpayers who use ChatGPT, Claude, Microsoft Copilot and other AI tools to prepare tax returns could face requests to disclose relevant chatbot conversations under proposed changes to HM Revenue and Customs (HMRC) information powers.
The UK government is seeking to modernise Section 114 of the Finance Act 2008, expanding how HMRC can inspect digital records, automated calculations and information held by third-party software providers. The reforms are included in the Finance Bill 2026–27 and remain subject to parliamentary approval.
- HMRC’s proposed digital information powers could extend to AI-generated tax calculations, chatbot histories and automated records where they are relevant to a lawful tax investigation.
- The reforms would update Section 114 of the Finance Act 2008, allowing HMRC to examine how tax figures are generated by software and AI systems.
- HMRC says it will not routinely inspect private AI conversations and must have an existing legal basis for requesting information.
Could HMRC inspect ChatGPT conversations used for tax returns?
Under existing legislation, HMRC can require taxpayers and businesses to provide financial records needed to establish whether the correct amount of tax has been paid.
The proposed changes would extend these powers to reflect how financial information is now generated, processed and stored.
The draft legislation introduces broader definitions of digital information, including references to relevant information and other digital material.
Nimesh Shah of Blick Rothenberg has questioned whether conversations with ChatGPT, Claude and Copilot could become disclosable when they form part of a taxpayer’s accounting or calculation process.
Tax specialists say this could bring AI-generated working papers, chatbot prompts and automated calculation histories within the scope of an investigation if they were used to prepare tax figures.
However, the proposals do not establish an unrestricted right for HMRC to access private AI accounts.
An HMRC spokesperson said the changes were intended to modernise existing information powers, adding that the authority could only request information where it already had a lawful basis to do so.
How the new HMRC AI tax rules could work
The reforms affect Section 114 and Schedule 36 of the Finance Act 2008, which govern access to computer records and tax information.
| Area | Current position | Proposed changes |
|---|---|---|
| Tax records | HMRC can request relevant financial documents | Broader recognition of digital information |
| Software systems | Existing powers allow inspection of relevant computer records | Updated provisions for modern digital systems |
| AI-generated calculations | Disclosure depends on relevance and existing legal powers | Underlying automated processes may receive greater scrutiny |
| Chatbot conversations | No general right to inspect private AI histories | Relevant tax-related conversations could potentially be requested |
| Third-party providers | Information may be requested under applicable legal powers | Updated rules addressing externally managed digital records |
| Legal safeguards | Requests must meet statutory requirements | Existing lawful-basis requirements remain |
The government published draft legislation in July 2026, with its technical consultation closing on September 7.
The Finance Bill 2026–27 was subsequently introduced in Parliament. The proposed amendments will require Royal Assent before taking effect.
Which taxpayers 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.
If HMRC investigates those calculations, it may seek information explaining how the reported figures were produced.
Seb Maley, chief executive of tax insurance provider Qdos, warned that using automated systems does not transfer responsibility for tax compliance away from taxpayers.
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.
However, AI-generated tax guidance can contain errors, particularly when dealing with complex rules, exemptions or recent legislative changes.
Privacy concerns over HMRC access to AI records
The proposals have prompted questions about how tax authorities would distinguish relevant financial information from unrelated private conversations.
The TaxPayers’ Alliance has warned that requiring disclosure of personal AI communications could represent an intrusion into taxpayers’ privacy.
Tax advisers have also raised concerns about commercially sensitive information stored in AI systems and the potential volume of material accessible during investigations.
Nevertheless, HMRC maintains that its powers remain subject to legal restrictions.
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.
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.
Why HMRC is expanding its digital tax powers
The reforms form part of the government’s efforts to modernise tax administration and reduce the estimated £59bn tax gap.
Increasing use of cloud accounting, automated bookkeeping and AI-assisted calculations has changed how taxpayers maintain financial information.
HMRC argues that its existing legislation must reflect these developments to ensure tax investigations remain effective.
The government’s Budget 2026 documents confirm plans to update civil information and inspection powers under Schedule 36 and computer-record provisions under Section 114 of the Finance Act 2008.
The legislation does not prohibit taxpayers from using ChatGPT or other AI platforms for tax-related purposes.
However, 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.
The final scope of HMRC’s access to AI-generated records will depend on the legislation enacted and how the updated powers are interpreted and applied.
