HM Revenue and Customs (HMRC) is set to harness the power of artificial intelligence (AI) in a major new drive to clamp down on tax evasion and avoidance, targeting a tax gap estimated to have cost the Treasury hundreds of millions.
AI to Target a £700 Million Tax Gap
The tax authority confirmed it is actively exploring how AI and digital technology can be used to identify and prevent fraud within the system. This move comes as official estimates suggest the UK government lost approximately £700 million due to tax avoidance between 2023 and 2024.
In a parliamentary exchange, Labour MP Shaun Davies questioned Exchequer Secretary Dan Tomlinson on the potential for technology to reduce evasion. The response outlined HMRC's strategic expansion, which includes using new risk-targeting capabilities to select cases for investigation more effectively.
Preventing Issues Before They Grow
A key part of the plan involves deploying AI to spot emerging problems within the tax system at an early stage. "It also means using AI to identify nascent issues with the tax system, so they can act rapidly to prevent them before they grow," stated Tomlinson's reply.
HMRC emphasised that the adoption of AI aims to deliver a more efficient service. The technology will handle administrative tasks, freeing up staff to spend more time assisting taxpayers. Crucially, it will also enhance HMRC's ability to target action against fraud and evasion, aiming to recover more funds for vital public services.
Human Oversight Remains Paramount
Despite the advanced technology, HMRC has provided strong assurances about human control. AI will support processes but will not replace human decision-making and oversight.
A spokesperson for HMRC stated: "In cases where AI is used in a way that could impact customer outcomes, HMRC ensures that results are explainable and that there is always human oversight. This means that even when AI is used to support decision-making, final decisions are always made by experienced, trained case workers."
The authority also reiterated its commitment to the safe and ethical use of AI, underpinned by strict data protection and security standards. The move signals a significant shift in how tax compliance will be managed in the UK, blending cutting-edge technology with expert human judgement to close the tax gap.
