HMRC Leverages AI to Monitor Social Media for Tax Evasion

The UK’s tax authority, HMRC, has confirmed its use of artificial intelligence (AI) to monitor social media posts as part of its efforts to combat tax evasion. This initiative aims to identify potential cases of tax fraud by examining online activity that could indicate discrepancies between reported income and lifestyle choices.

According to a report from The Telegraph, HMRC is particularly focused on posts that showcase significant expenditures, such as luxury vacations or high-value purchases. Such activities may raise red flags, suggesting that individuals could be living beyond their declared means. An HMRC spokesperson emphasized that this AI-driven monitoring is strictly limited to criminal investigations and will not affect the average taxpayer. The agency maintains that it has implemented “robust safeguards” to protect individual privacy, noting that social media monitoring has been part of its strategy for a number of years.

The use of AI comes at a time when Chancellor Rachel Reeves is under pressure to address a significant fiscal challenge, with a budget deficit estimated at £51 billion. The government is exploring new revenue streams while aiming to avoid raising taxes on working individuals. Earlier this year, Reeves announced an additional £1 billion crackdown on tax evasion, which includes new powers for HMRC to recover lost tax revenue.

In the fiscal year 2022-23, nearly £5.5 billion was lost to tax evasion, with small businesses accounting for approximately 81% of this total. Furthermore, HMRC has acknowledged difficulties in accessing accurate taxpayer data in about one-fifth of cases, leading to substantial amounts of uncollected taxes.

Concerns Over AI Implementation

While the adoption of AI for monitoring social media is seen as a cost-effective measure, it has raised concerns among lawmakers regarding potential errors and misuse of technology. Senior Conservative MP Bob Blackman voiced his apprehensions, stating that legal actions based solely on AI findings without human oversight could result in unjust consequences for innocent individuals. He remarked, “You’ve got to have a check and balance. The risk is that AI gets it wrong and someone is pilloried.”

Former security minister Sir John Hayes echoed these sentiments, warning that reliance on automated processes could lead to significant oversights, reminiscent of the Horizon scandal involving the Post Office. He stressed the need for experienced human judgment in handling sensitive matters, stating, “People need to be assured that human beings with experience, common sense and judgement are making decisions.”

In addition to social media surveillance, HMRC employs an IT system known as Connect to analyze financial records, spending habits, and tax returns. The agency is increasingly moving towards digital solutions to enhance efficiency in its investigations.

Changes to Bank Reporting Requirements

In an effort to bolster tax compliance, new regulations have been approved that will require banks to collect National Insurance numbers from both new and existing customers with savings accounts starting from April 2027. This initiative aims to simplify the process of identifying individuals who may be exceeding their personal savings allowance.

As HMRC adapts to modern technologies and methodologies, taxpayers are reminded of the importance of filing accurate returns. To register for self-assessment, individuals must obtain a Unique Taxpayer Reference (UTR) by October 5 of the tax year. The deadline for submitting online tax returns is January 31 of the following year, with paper returns due by October 31.

The implementation of AI in tax investigations marks a significant shift in HMRC’s approach to enforcement. While the agency aims to improve efficiency and recover lost revenue, the balance between technology and human oversight remains a critical issue for policymakers and taxpayers alike.