The UK's tax authority is turning to cutting-edge artificial intelligence in a major push to close a multi-billion-pound tax gap exploited by fraudsters and avoiders. The Treasury has detailed how HM Revenue and Customs (HMRC) plans to use AI as a powerful tool to spot and target non-compliance more efficiently.
The Scale of the Problem: Evasion and Avoidance
MPs were informed that the government is actively working out how to deploy AI to tackle a serious financial drain. The total tax gap for evasion and avoidance reached an estimated £6.5 billion for the 2023-24 period. This figure comprises two distinct issues.
Tax avoidance, described by HMRC as using contrived and artificial transactions to secure an advantage within the letter but not the spirit of the law, cost the Treasury around £0.7 billion between 2023 and 2024.
Tax evasion, which is the illegal act of deliberately not paying tax that is due, represents a far larger sum. Losses from evasion were approximately £5.5 billion in 2022-23, contributing significantly to the following year's total.
AI as a Force Multiplier for HMRC
The plans came to light after Labour MP for Telford, Shaun Davies, questioned Exchequer Secretary Dan Tomlinson on the potential of digital technology. In a reply dated Tuesday, December 23, Tomlinson provided an update on HMRC's technological expansion.
He explained that the authority is developing new risk-targeting capabilities to improve case selection for investigation. Crucially, AI will be used to identify nascent issues within the tax system, allowing officials to act rapidly and prevent problems from growing.
"HMRC is harnessing artificial intelligence to deliver a more efficient and professional service for customers," Tomlinson stated. He emphasised that the technology would serve as a tool to help staff perform their jobs more effectively, not replace them.
Human Oversight Remains Paramount
Despite the advanced technology, HMRC is committed to maintaining human control over critical decisions. The Exchequer Secretary assured that AI supports processes but never replaces human decision-making and oversight.
All final decisions will continue to be made by experienced, trained case workers. In instances where AI could impact customer outcomes, HMRC ensures results are explainable and subject to strict human review.
The adoption of AI is expected to free up staff from administrative tasks, allowing them to spend more time assisting taxpayers and focusing complex investigations. The overarching goal is to bring in more money for vital public services by better targeting action against fraud and evasion.
This initiative is underpinned by promises of strict adherence to data protection, security, and ethical standards, ensuring the powerful technology is used safely and responsibly.
