HMRC’s AI Attack: How to Settle Business Tax Arrears & Negotiate Payment Arrangements

Artificial Intelligence has officially joined HMRC’s payroll.

From detecting fraudulent claims to identifying unpaid tax liabilities, HMRC is now using advanced AI tools and its powerful Connect database to track financial discrepancies and clamp down on tax avoidance.

And while this might sound like a positive step for government efficiency, for thousands of individuals and business owners already struggling with tax debt, this technological evolution introduces new challenges – and higher stakes. For UK directors facing urgent VAT or PAYE arrears, the ability to secure a manageable commercial payment plan is now more critical than ever.

A Fiscal Black Hole, and a Government on a Mission

When Labour took power in 2024, Chancellor Rachel Reeves announced that a Treasury audit had uncovered a £21.9 billion funding shortfall (often cited as a “£22 billion black hole”) in departmental spending. In August 2025, UK government borrowing reached £18 billion, marking a five-year high for the month and a £3.5 billion increase from August 2024.

With public pressure mounting, the Treasury is turning to HMRC to help plug the gap. The message is clear: recover more, recover faster.

But it’s not just human inspectors doing the work.

The Rise of AI in Tax Enforcement

HMRC’s latest addition, the Fraud Risk Assessment Accelerator, has reportedly helped recover over £480 million in just 12 months by cross-referencing government data to identify suspicious activity before it becomes a fraud case.

Meanwhile, the Connect system, which has been in operation since 2010, has reached new heights. According to a recent Freedom of Information request reported by the Financial Times, the tool helped HMRC collect £4.6 billion in additional tax in 2024–25, a 35% increase on previous years.

Connect pulls data from banks, online marketplaces, property lettings, and even social media. It builds complex networks that reveal patterns no human investigator could spot.

For compliant taxpayers, this might sound reassuring. But for anyone already under HMRC pressure – particularly business owners with cash flow issues, unpaid PAYE or VAT arrears, or director loan exposures – this level of surveillance can quickly become overwhelming.

What Does This Mean for Business Owners?

At Bell & Company, we’ve seen firsthand how easily HMRC intervention can escalate.

An automated query can trigger a manual investigation. A flagged transaction can lead to a formal demand. And as AI strengthens HMRC’s reach, more businesses and individuals will find themselves under review, not necessarily because of deliberate wrongdoing, but because of data anomalies.

Even where there’s no intent to evade tax, HMRC’s algorithms can misinterpret cash flow difficulties, inconsistent filings, or timing errors as risk indicators.

That’s why professional support is more critical than ever. Understanding what HMRC can see –  and how they interpret it – is key to protecting your position. Bell & Company specialise in intervening early to secure a formal HMRC Time to Pay (TTP) arrangement, your best defence against aggressive recovery action.

Data Power VS Human Judgment

HMRC maintains that AI will not replace human decision-making. “Other factors are also considered, and human insight always makes the final judgment,” the tax authority has said.

However, as seen in previous government trials, AI can produce biased or inaccurate outputs, particularly when assessing large datasets. Mistakes can have serious consequences when livelihoods and homes are at stake.

As Domilia Timonyte, Associate Director at Bell & Company, notes, “Technology and AI are transforming how HMRC identifies and pursues tax arrears, making their processes faster and more data-driven than ever. But no algorithm can replace the strategic thinking, negotiation skills, and human judgment required to secure manageable payment arrangements. At Bell & Company, we act as that human defence – helping businesses and directors navigate complex tax obligations, protect personal and business assets, and reach outcomes that an automated system simply can’t achieve.”

Our concern is simple: as HMRC’s systems become more powerful, so too must your defence.

How Bell & Company Can Help

Whether you’re a director facing pressure over unpaid Corporation Tax, VAT or PAYE arrears in London, Manchester, or anywhere in the UK, our team specialises in navigating these complex financial situations.

We don’t just react to HMRC demands; we proactively negotiate HMRC Time to Pay arrangements across all UK regions. Bell & Company understand how HMRC’s recovery systems operate, how data triggers investigations, and, most importantly, how to negotiate fair, commercially viable payment outcomes that protect your future.

Our team recently secured a 36-month Time to Pay arrangement—three times the typical length—for a production business with over £1 million turnover, even after their previous TTP agreement had lapsed. This level of outcome is only achieved through meticulous financial analysis and expert negotiation, skills that are now essential to ‘beat the algorithms.’

Need a Time to Pay Arrangement? Let Our Experts Beat the Algorithms.

Technology may be changing the way HMRC collects tax, making them faster and more aggressive. But when it comes to negotiating manageable commercial payment plans for business tax arrears, you need human insight and expertise. Bell & Company are the human defence against the algorithm.

Call us today for a confidential chat about your HMRC business debt issues.

📞 Call us today: 0330 159 5820 

📧 Email us: hello@bellcomp.co.uk