HMRC: How AI is Transforming Tax Collection and Fraud Tech
HM Revenue and Customs (HMRC) has signed a 10-year contract worth ÂŁ175m (US$217m) with Quantexa and expanded its partnership with Microsoft to deploy gen AI across operations.
The tax authority plans to use the technology to reduce fraud and improve response times after public complaints exceeded 93,000 in 2024-25, up from 70,000 four years earlier, according to BBC reports.
The department handles interactions with 40 million taxpayers through 20,000 customer service staff.
Taxpayers cited poor response times as the main issue in complaints data.
UK firm leads fraud detection
Quantexa will provide data integration technology that merges internal HMRC records with external sources.
The London-based company, valued at US$2.6bn, will supply systems designed to identify networks of fraudulent activity and correct unintentional errors such as payments filed under incorrect reference numbers.
The contract could show a preference for domestic technology suppliers over US platforms.
Vishal Marria, Founder and CEO of Quantexa, says the technology is designed to "support human decision-making, not replace it".
He adds that "in government environments, AI cannot operate as a black box".
Decisions using the system must remain transparent and auditable, according to Vishal.
HMRC confirmed that AI will not make final determinations on tax review cases.
David Johnson, Head of Innovation at HMRC, tells Microsoft that "any decisions will be reviewed and signed off by a human in the process with the relevant tax expertise".
Microsoft tools reach 50,000 staff
Microsoft 365 Copilot is being deployed to 28,000 HMRC employees, with plans to extend access to 50,000 workers.
The collaboration with Microsoft continues despite the Quantexa contract.
James Mitton, HMRC's first Chief AI Officer, tells Microsoft the goal is to become an "agile department supported by a modern IT infrastructure, with innovation driving a better customer experience".
Specific applications include AI agents designed to summarise customer complaints and help advisers locate information needed to resolve issues.
David tells Microsoft the systems would offer "smarter, more intuitive customer journeys" with tailored guidance to prevent taxpayers from missing deadlines.
The department plans to automate clerical tasks to allow civil servants to focus on complex work.
Tax gap closure targets funding
HMRC manages one of the UK's largest customer support operations.
The department believes automation efficiencies will help close the tax gap, which measures the difference between tax owed and tax collected.
Closing the gap could mean more funding for public services including the NHS and education, according to government statements.
The technology rollout aims to make the tax process "simpler, more efficient" for users.
The modernisation programme comes as the department faces pressure to improve service standards while reducing operational costs.
The partnerships with Quantexa and Microsoft represent the department's attempt to address performance issues through technology deployment.
