“We never take HMRC data away from the HMRC environment."
HM Revenue and Customs is to use artificial intelligence to spot fraud and tax return errors.
It has signed a 10-year deal worth £175 million with British technology company Quantexa to improve its services using AI.
The agreement will see Quantexa provide AI-powered technology designed to help HMRC identify fraud, reduce errors and improve customer service performance.
According to the company, its systems will combine HMRC data with external information sources to detect suspicious patterns more quickly.
The technology will also help uncover hidden networks of companies and individuals involved in fraudulent activity.
The move comes as public frustration with HMRC has increased in recent years.
A Freedom of Information request by campaign group the Contentious Tax Group found there were more than 93,000 complaints about HMRC during 2024-25.
That figure marked a significant rise from just over 70,000 complaints recorded in 2020-21. Poor response times were among the main concerns raised by taxpayers.
Quantexa said its AI systems would not make unchecked automated decisions about taxpayers. Instead, human oversight will remain part of the process.
Quantexa chief executive Vishal Marria told the BBC the technology was designed to “support human decision-making, not replace it”.
He said: “In government environments, AI cannot operate as a black box.
“Decisions need to be transparent, auditable, and explainable, particularly in areas affecting citizens directly.”
Marria also addressed concerns around data security and privacy. He said HMRC data would remain protected and separate from the rest of the business.
He added: “We never take HMRC data away from the HMRC environment.”
Quantexa also said the technology would help HMRC identify legitimate payments sent with incorrect reference numbers, potentially reducing delays for taxpayers.
The London-based firm has been valued at £1.9 billion. Its major corporate clients include HSBC and Vodafone.
The appointment of a British company aligns with the government’s wider push towards “digital sovereignty”.
The strategy aims to reduce reliance on overseas technology providers, particularly major US firms.
Questions around foreign technology dependence have grown following the controversial £330 million contract awarded to Palantir Technologies to build a data platform for the NHS.
Despite AI and machine learning becoming top priorities for the public sector, digital literacy and leadership have emerged as major barriers for digital transformation, according to research by Granicus.
Of the essential skills most likely to prevent the adoption of better digital services in the future, 25% of public sector respondents said digital literacy is a crucial skill to address.
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