Late at night, all alone with your chatbot, you might have wondered: can I put the cat down as a business expense? And if so, how many more years can I get away with it?
But have you ever thought that the taxman could one day come for not only your feline friend's "business" history, but also the chat history that led you to believe this was a good idea?
A new, modernized power to inspect and check "anything" is what the UK's HMRC (His Majesty's Revenue and Customs) is writing into law.
Currently, the heading of section 114 of the Finance Act 2008 is "Computer records etc." and the power is to inspect and check the operation of "any computer and any associated apparatus or material."
But that is to be changed to "Digital information" and the power will be to inspect and check the operation of "anything."
The idea is to get information on "how relevant tax figures have been produced including where they are generated using software or automated processes to support more accurate tax reporting and strengthen compliance," HMRC said.
It's not clear what "anything" is meant to cover, but it's easy to see why the tax authority would want to update its powers from the age of computers and associated apparatus, to the age of AI chatbots.
The Telegraph has picked up on the chatbot angle, saying that tax adviser Nimesh Shah of Blick Rothenberg believes that the new rules mean that "prompt histories, AI-generated working papers, chatbot conversations used to prepare tax calculations, and audit trails within AI agents like Copilot, ChatGPT, and Claude could become disclosable if they formed part of the tax calculation process."
Shah's conclusion is based on the draft law stating that HMRC wants information on "how tax figures have been produced using software or automated processes."
The draft does not mention any of these chatbots by name, but Shah's comments make sense because the language used is so broad.
A "relevant thing" is defined as "anything where there is to be found information of any description" that a person may be required to produce.
So, all the things people tell their chatbots, from their deepest fears to their tax calculations, are essentially on the same level here. And all that information is at risk of being demanded by the tax authority.
The TaxPayers' Alliance campaign manager Anne Strickland is quoted as saying that requesting private AI conversations "would be a deeply intrusive overreach by the taxman."
"HMRC already has sweeping powers, and expanding them further risks trampling over the privacy of ordinary Britons," Strickland said.
Other changes the Finance Bill 2026-27 brings to the 2008 act is extending the duty to give HMRC officers "such reasonable assistance" as they may require to "any person who created, developed or produced that thing."
In other words, software makers will have to provide assistance, not just its users. The penalty for refusing is £300, and access must be given "at any reasonable time."
And while the original act allowed an "authorised officer" to issue an information notice, now any HMRC officer will be able to do it, with an authorised officer only needing to approve it. The notice can be issued to a third party, and the information that can be demanded includes identifiers such as National Insurance numbers and email addresses.
The bill also brings cryptoasset service providers into the scope of Financial Institution Notices, and scraps the annual report to Parliament on these notices.
The Telegraph reads this as third parties "including AI platforms and software providers" being made to share taxpayer information, but the document only mentions "software providers" and "intermediaries."
HMRC has sought to reassure everyone that this is not as bad as it looks. A spokesman said, "This is about updating our existing information powers to reflect how tax information is now stored and processed digitally."
And: "It is not about going through everyone's use of large language models. We can only request information where we already have a lawful basis to do so."
But the spokesman did not explain how the new powers are not about "going through" everyone's use of large language models, when the law is being rewritten to allow exactly that.
Instead, the spokesman said, "These changes do not create a new standalone information power."
The only thing that is meant to stand in the way of abuse of the new powers is that information must be "reasonably required to check a tax position."
But HMRC's own paper claims that the changes "are not expected to impact individuals' experience of dealing with HMRC."
Really? It then goes on to list the changes, including that the duty to provide "reasonable assistance" will now also apply to software makers, and that the tax authority will be able to demand "anything."
More than 30% of businesses had used AI such as ChatGPT or Copilot to answer a tax question, a survey carried out in September by the Administrative Burdens Advisory Board found. Finder reported last year that 40% of people had used generative tools for financial advice.
Qdos chief executive Seb Maley said, "It wants to know not just what tax figure a system produces, but how it arrived at that number." And, "Simply trusting a system to get things right won't be enough if HMRC comes knocking."
The Telegraph writes that the bill was introduced in the Commons on November 3, with the second reading scheduled for November 23. The paper expects the bill to receive Royal Assent by the end of May 2027, at which point the changes become law.
Even though people may be thinking about their taxes when they ask a chatbot something, they may also be sharing plenty of other information - which would be available to the tax authority if it decides to come after it.
And even though the bill's goal is to close a £59bn tax gap, and this is supposed to be achieved by making sure everyone pays the tax they owe, the question remains if the way to do it is by giving the tax authority more and more powers.
