HMRC released guidance on 28 January 2026 for developers of tax software that use generative AI. The guidance sets five mandatory principles—transparency, reliable source data, human oversight, security/GDPR compliance, and ethical AI with continuous auditing—to ensure AI outputs are trustworthy and legally grounded. Compliance requires clear disclosure, audit trails, limited data sources, and ongoing monitoring of models.
The guidance lists transparency, reliable source data, human oversight, security/GDPR compliance, and ethical AI with continuous auditing as the five mandatory principles.
HMRC published the guidance on 28 January 2026.
Acceptable data sources are official HMRC publications, primary legislation, and established case law; generic web content is not acceptable.
Software must prompt users to review outputs, allow corrections, provide challenge mechanisms, flag complex scenarios, and recommend professional advice.
HMRC expects compliance with UK GDPR, privacy by design, a secure software development lifecycle (SSDLC), and clear visibility to users on how their data is processed.
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VatCalc · about 2 hours ago
A UK Upper Tribunal decision allows a bespoke hair‑replacement system for severe female hair loss to be zero‑rated under Schedule 8 of the VAT Act 1994. The ruling expands the definition of disability to include social and psychological impacts and confirms that composite supplies that adapt goods can qualify for relief. The case clarifies that wigs and similar products are not automatically treated the same, opening new zero‑rating opportunities for adaptive products.
JDSupra · 4 days ago
The UK Supreme Court’s 2025 decision in HMRC v Hotel La Tour Ltd clarified that input VAT on professional fees linked to a share sale is irrecoverable because the costs are directly tied to an exempt supply. The ruling confirms that the direct and immediate link test applies to share sales and that being part of a VAT group does not allow recovery of such fees. The judgment underscores the need for careful documentation to distinguish between exempt and out‑of‑scope transactions.
Bloomberg Tax · 4 days ago
The UK First‑Tier Tax Tribunal issued a judgment on Jan. 9 clarifying input VAT deduction and zero‑rating rules for second‑hand car transactions. The case involved a company that purchased high‑value used cars in Northern Ireland and sold them to customers in the Republic of Ireland. The Tribunal found that the taxpayer could not claim the input VAT deduction and zero‑rating as the Tax Agency had denied the claims.
HMRC · 5 days ago
This HMRC internal manual provides guidance on the reverse charge procedure, a measure designed to counter criminal attacks on UK VAT. It outlines the application and implementation of the reverse charge mechanism for relevant transactions.
Bloomberg Tax · 5 days ago
The UK First‑Tier Tribunal clarified that a logistics provider acting as an agent in its own name can recover import VAT on clinical trial drugs, overturning HMRC’s earlier denial. The tribunal held that the taxpayer’s lack of ownership and supply for consideration did not preclude input‑VAT treatment. The decision, case No. TC09749, was issued on 14 January 2026.
Xeinadin · 5 days ago
HMRC has introduced a new requirement for UK VAT registration, effective 19 January 2026, that businesses must provide the unique VAT registration application reference number before adding VAT to a Business Tax Account. This step aims to close a fraud window where criminals linked VAT numbers to Government Gateway accounts before the legitimate owner could log in. Businesses should safeguard the reference number and act swiftly after registration to mitigate fraud risks.
