HMRC Eyes AI Overhaul as Public Complaints Hit Record Highs

HM Revenue and Customs (HMRC) is embarking on a decade-long AI-driven transformation aimed at simplifying services, cutting response times, and tightening fraud controls – backed by a new 10-year, £175m (US$237m) agreement with UK tech firm Quantexa and an expanded collaboration with Microsoft to embed generative AI across the department.

The overhaul arrives amid rising public dissatisfaction. BBC reporting shows complaints about HMRC’s performance climbed to more than 93,000 in 2024-25, up from 70,000 four years earlier, with poor response times a common concern.

HMRC says AI-enabled systems will help make interactions “simpler, more efficient” and better aligned with a digital-first public.

Tackling fraud and errors with data integration

Quantexa – valued at US$2.6bn – will supply technology that fuses HMRC’s internal data with external sources to surface hidden networks of fraudulent activity and address unintentional errors faster, such as misapplied payments.

Opting for a UK-based provider aligns with the government’s push for digital sovereignty and reduced reliance on US hyperscalers.

Microsoft remains a key collaborator in HMRC’s internal evolution.

The department is rolling out Microsoft 365 Copilot to 28,000 staff, with plans to extend access to 50,000 employees.

Improving the customer experience

Managing one of the UK’s largest customer operations – 20,000 staff serving 40 million taxpayers – HMRC is piloting AI agents to speed up complaints handling. These tools summarise grievances and surface the information advisers need to resolve issues quickly.

James Mitton, HMRC’s first Chief AI Officer, says the goal is to create an “agile department supported by a modern IT infrastructure, with innovation driving a better customer experience”.

David Johnson, Head of Innovation at HMRC, says the new systems aim to deliver “smarter, more intuitive customer journeys” with tailored guidance to help taxpayers avoid missing deadlines.

Human-in-the-loop and accountable AI

Despite the investment in automation, HMRC and its partners stress that AI will augment, not replace, human judgment.

Quantexa Founder and CEO Vishal Marria said the technology is built to “support human decision-making, not replace it,” adding that “in government environments, AI cannot operate as a black box” – decisions must be transparent and auditable.

HMRC confirmed that AI will not make final decisions on tax review cases: “Any decisions will be reviewed and signed off by a human in the process with the relevant tax expertise,” David said.

By automating repetitive clerical work, HMRC expects to free civil servants for higher‑value tasks.

The government ultimately hopes these efficiencies will help narrow the tax gap – the shortfall between tax owed and collected – boosting funding for essential public services such as the NHS and education.