The government has published draft legislation for Finance Bill 2026–27, proposing updates to how HMRC's existing information and inspection powers apply to digital records. This has led to headlines suggesting the tax authority could demand taxpayers’ ChatGPT histories, though the government indicates this gives a misleading impression of the proposal.
The draft legislation would update section 114 of the Finance Act 2008, which supports HMRC's information powers where records are held electronically. It would refer to digital “information” and a “relevant thing,” reflecting that information may reside within software, cloud services, or automated systems.
HMRC states this could include information showing how a relevant tax figure was produced, such as source figures or adjustments behind a rental-income calculation. In some circumstances, an AI-generated working paper or a prompt used to produce that calculation could also be relevant.
However, HMRC's policy paper clarifies that the proposal does not create a general power to browse a person’s AI account. The underlying Schedule 36 requirements of the Finance Act 2008 would continue to apply, meaning information sought must be reasonably required for the relevant tax purpose. HMRC has also stated it is not about routinely going through everyone’s use of large language models.
Existing safeguards under Schedule 36 remain, allowing taxpayers to appeal information notices. Penalties for non-compliance (£300) and inaccuracies (up to £3,000) are also existing provisions, not new penalties introduced by this proposal.