Automating Income Tax Self Assessment Innovation Proof of Concept

His Majesty's Revenue and Customs (HMRC) is the UK's tax, payments and customs authority, and we have a vital purpose: we collect the money that pays for the UK's public services, and help families and individuals with targeted financial support.

HMRC's Transformation Roadmap sets a clear vision for the future tax and customs system, which envisages greater automation, increasing intermediation and integrating tax with the processes and systems taxpayers use in their everyday lives.

To support this ambition, HMRC is seeking to explore, develop and test ideas with industry on how the payments, banking and fintech ecosystems could enable a simpler, more automated and customer‑focused tax system.

This will be delivered through co‑created, innovation‑led PoCs to safely test emerging data and fintech capabilities, enable rapid learning, and generate evidence to support informed horizon scanning and decision making.

We are inviting suppliers to participate in a pre-market engagement exercise, to gather insights into a potential automating Income Tax Self Assessment (ITSA) Innovation Proof of Concept (PoC).

If pursued, this PoC will seek to test improvements in close to real-time categorisation and calculation of tax liabilities, using advancements in transaction data and better integrations between payment system actors. It aims to go beyond what can be done in current accounting software.

The list of non-exhaustive services under consideration are as follows:

• A working PoC model developed and demonstrated in supplier(s) test / sandbox environment which tests how synthetic transactions can be:

-- produced or captured (automatically, manually or via a hybrid approach)

-- transferred to accounting software

-- coordinated and used by accounting software to calculate tax liabilities across multiple income and expense streams

-- transferred to HMRC via existing infrastructure (e.g. Making Tax Digital APIs)

• Uses realistic supplier-generated synthetic data for two HMRC defined personas.
• Demonstrates model impact on HMRC defined transactions which are commonly mis-categorised; mis-apportioned; have unclear gross / net settlements.
• Sufficient build and operational detail to demonstrate end-to-end feasibility, rather than solely conceptual designs or options appraisals.

These products/services are expected to be key enablers to delivering the following capabilities:

• Tax system simplification
• Upstream compliance
• Customer financial clarity and cash-flow management
• Business systems integration
• End-to-end data propagation
• API handling

HRMC are considering phasing this procurement into the following: (1) preparation; (2) build; (3) test and evaluation with conditional progression to build phase subject to agreed success criteria.

Phase 1: Preparation (8 weeks):

• Supplier generation of robust realistic synthetic payment data (assured by HMRC)
• Supplier evaluation plan including impact metrics
• Baseline of synthetic payment data established
• System design blueprint of proposed working model

Phase 2: Build (12 weeks):

• Design sprints including extensive records, resulting in the working technical demonstrator.
• Model must be developed and demonstrated in supplier(s) test / sandbox environment using agreed synthetic data

Phase 3: Test and evaluation (6 weeks testing, 6 weeks evaluation):

• Test of the technical demonstrator by the supplier(s) and HMRC, against agreed metrics
• Evaluation reports of the technical demonstrator, including scalability and re-use recommendations

This PoC approach is focused on structured discovery and learning. It is not a commitment to implement a specific solution, technical design, or live service.