Is AI HMRC’s Newest Employee?

At this point, it looks like AI has taken over almost all areas of our lives.

We can use AI to write, come up with ideas, have full-blown conversations and even help with financial planning.

And now, AI has become the newest employee of HMRC. But this civil servant isn’t like any other, HMRC is training its own AI to scan and identify suspicious activity to clamp down on tax avoidance.

As the government relies on AI more and more to help it with operations, it’s worth asking: how much power should be handed to the algorithm?

 

The Fiscal “Black Hole” That Needs Plugging

 

Back when Labour came into government in August 2024, Chancellor Rachel Reeves revealed that there is a £22 billion “black hole” in the country’s finances.

Just last week, The Guardian reported that UK borrowing hit a 5-year high for August at £18 billion! And as the government pours more support into public services, one of the ways it has tried to recoup funds is through increasing taxes.

The problem? Not everyone is paying those taxes. In fact, According to Parliament, HMRC estimates that tax evasion cost £5.5 billion in lost revenue in 2022-23. On top of that, the cost of Covid fraud alone was more than £7 billion.

Given how much of a financial mess the country is in, it’s no surprise that HMRC are looking to recoup those funds, and fast.

 

 

HMRC’s Newest AI Tool

 

To take a step in the right direction, this week the Cabinet Office announced that their new AI tool – the Fraud Risk Assessment Accelerator – has helped them recoup more than £480 million in just 12 months.

So, how does it work? Well, the tool works by cross-referencing information across different government accounts to look for anything suspicious. It also analyses new policies to work out how scammers might be able to exploit them, before being rolled out.

The government have already named the programme a huge success, with The Cabinet office saying that using these tools will allow taxpayer money to fund public services and not just line the pockets of scammers.

The government is also now preparing to licence the tool internationally, with countries like the US, Canada, Australia and New Zealand all interested in using it.

 

How Have HMRC Used AI Before?

 

Whilst the Fraud Risk Assessment Accelerator certainly looks like it could be a useful tool, it’s not the first time HMRC has ventured into the world of AI.

In fact, AI has previously been used to monitor social media accounts to help identify tax evasion.

And whilst HMRC are making it clear that the AI doesn’t exist to replace human decision makers, others have raised questions about its ability to produce erroneous information and crucially, its inability to see if a person’s social media has been hacked.

According to David Johnson, HMRC’s head of innovation, AI automation supported around 13 million transactions in 2024/25, freeing up the equivalent of 400 full-time staff.

 

Has AI Got Too Much Power?

 

Whilst it’s easy to see the upside of using AI in this way – namely to claw back record amounts of money back into the government, others have warned about over-reliance.

Just last year, an AI tool that was being used to clamp down on welfare fraud was found to show bias according to people’s age, disability, marital status and nationality. (BBC)

This can be particularly problematic when looking at national databases where certain groups may be more prone to targeting.

Others have argued that government reliance on AI can’t be a good thing – especially as privacy laws are still evolving and AI has been known to hallucinate.

With the stakes so high, is it worth the risk?

 

So, Is AI Here To Stay As The Newest Civil Servant?

 

By all accounts, AI is a fantastic employee – it doesn’t take holidays, doesn’t get sick and can analyse millions of data points faster than any human.

In that sense, it’s a smart hire.

However, AI still has a long way to go. It can’t spot nuanced errors and is still pretty prone to mistakes and privacy leaks.

But as HMRC continue to help the government plug their fiscal black hole, the challenge will be using AI in a way that protects compliant taxpayers and analyses the data fairly.

So for now, AI might be HMRC’s newest employee, but can it be trusted? Only time will tell.