HMRC could demand your ChatGPT conversations under sweeping new tax investigation powers

Millions of Britons using artificial intelligence to manage their finances could find their private chatbot conversations falling within the reach of the taxman, under proposed new powers allowing HM Revenue & Customs to demand digital records during tax investigations.

Prompts entered into ChatGPT, Microsoft Copilot and Claude, alongside AI-generated tax calculations and working papers, could be requested if HMRC considers them relevant to checking whether the correct amount of tax has been paid.

The proposals, contained in the Budget Bill expected to become law by the end of May, would widen the information the tax authority can demand from individuals, companies and third-party providers. They form part of a broader drive to close the UK’s £59bn tax gap.

HMRC already has powers to request computer records when investigating a taxpayer’s affairs. But the legislation would expand the definition of material it can obtain from digital systems, replacing the existing reference to computer “records” with the broader wording “relevant thing”.

That could encompass conversations with AI assistants used to calculate tax liabilities, records explaining how automated software reached a particular figure, and other digital material connected with a tax return.

The changes could also allow HMRC to require third parties, including AI platforms and software providers, to hand over information about taxpayers.

The proposals have raised concerns among privacy campaigners and tax professionals about how far the authority’s powers could extend into personal and commercially sensitive information.

Anne Strickland, a researcher at the TaxPayers’ Alliance, said requiring people to surrender private conversations with AI tools would represent a significant intrusion.

“Forcing taxpayers to hand over private AI conversations would be a deeply intrusive overreach by the taxman,” she said.

HMRC already uses formal information requests known as Schedule 36 notices to obtain documents and records from individuals and businesses. Ignoring such a notice can attract an initial £300 penalty, while failing to disclose inaccuracies can result in penalties of up to £3,000.

Taxpayers can challenge requests where HMRC cannot demonstrate a reasonable need for the information.

Strickland said the proposed expansion risked giving the authority even greater reach into ordinary people’s private lives. “Ministers must rein in the tax authority and ensure that this never becomes implemented,” she said.

Nimesh Shah, chief executive of accountancy firm Blick Rothenberg, said the central question would be how HMRC distinguished information genuinely relevant to an investigation from wider personal or commercially sensitive material.

“The challenge will be ensuring that these powers remain proportionate,” he said.

Seb Maley, chief executive of tax insurance provider Qdos, said the proposals reflected the growing use of AI in tax affairs.

“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,” he said. “It wants to know not just what tax figure a system produces, but how it arrived at that number.”

David Stirling, director and financial adviser at Mint Wealth, urged people to be mindful of what they entered into chatbots.

“If your chatbot helped calculate your tax bill, assume the workings could one day be scrutinised, so don’t type anything you wouldn’t fancy explaining to the taxman,” he said.

But financial adviser Zoe Dagless suggested the powers would probably be used in more complex investigations involving suspected avoidance or deliberate non-compliance. HMRC would not have the resources to examine everyone’s digital activity, she said.

The tax authority insisted the proposals did not amount to routine monitoring of AI use.

“This is about updating our existing information powers to reflect how tax information is now stored and processed digitally,” an HMRC spokesperson said. “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 debate comes as AI becomes increasingly embedded in personal finance. Lloyds Banking Group research found that more than 28mn UK adults, about 56 per cent of the population, have used AI for budgeting, financial advice or managing their money.

A September survey by the Administrative Burdens Advisory Board found that more than 30 per cent of businesses had used tools such as ChatGPT or Copilot to answer tax questions. Six in 10 said the technology had provided the answer they needed.

As AI becomes a routine part of financial decision-making, the proposals raise a new question for taxpayers: how private can a conversation with a chatbot really be when its contents may one day become relevant to a tax investigation?