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      HMRC’s transformation is no longer theoretical. Its 2026 update signals a new era of digital interaction and data‑driven scrutiny, demanding a step‑change in how corporates manage tax, finance and governance.

      From roadmap to reality

      HMRC’s transformation roadmap, set out in 2025, was never simply an internal modernisation exercise. It signalled a fundamental shift in how tax administration would operate. In our 2025 article, we highlighted HMRC’s roadmap as a multi‑year programme anchored on 3 key themes:

      • Embracing digitalisation and automation
      • Strengthening compliance to close the tax gap
      • Modernising and reforming operations

      One year on, HMRC’s 2026 progress report confirms increased momentum and tangible plans for implementation of the vision set out last year, with:

      • Increased digital self‑service for improved service performance.
      • Investment in structured data and AI‑supported risk assessment.
      • A risk‑based and data‑enabled compliance environment to close the tax gap.
      • Internal transformation for modernisation of HMRC’s systems and workforce.

      This article explores what that means for corporate tax operating models, from ERP integration, and Pillar Two transparency, to driving a data-enabled approach.

      Chris Rogers
      Chris Rogers

      Partner, Global Compliance and Transformation, Tax & Legal

      KPMG in the UK

      Key developments for corporate tax leaders

      Digital tax: What to expect
       

      What HMRC’s progress report says

      HMRC reports stabilising service levels, more customers using digital and automated channels, and ongoing efforts to reduce backlogs and response times. The medium‑term ambition is that majority of interactions are digital, with improved customer experience supported by modernised systems and more tailored support.

      What tax leaders need to know

      Corporate tax leaders can use HMRC’s customer experience ambitions as a benchmark for their own tax service model:

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      Digital by default requires process by design

      If HMRC expects routine interactions to be online and structured, corporate tax functions need equally disciplined workflows. Fragmented email trails and spreadsheet‑driven processes will struggle in a digital engagement model.

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      Complex queries will be judged on how well they are organised

      Large business cases will still need dialogue, but HMRC will expect clean, well‑evidenced files and rapid access to supporting data. That demands robust document management, workflow and audit trails across tax and finance.

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      Service expectations are two sided

      With HMRC under pressure to improve its responsiveness, corporates should anticipate that HMRC will expect the same from them (e.g. in terms of speed, clarity and completeness of responses).

      AI, data and tax scrutiny

      What HMRC’s progress report says

      HMRC is investing heavily in digital services, data platforms and AI tools, both for customer‑facing journeys and internal operations. The update highlights greater use of structured data, consolidation of IT platforms, secure cloud hosting, and rollout of AI (including large deployments of tools like Copilot and GOV.UK‑wide chat capabilities) to improve productivity and decision‑making.

      What tax leaders need to know

      Heads of Tax should treat HMRC’s data and AI agenda as a mandate to accelerate tax data remediation and governance in partnership with finance and IT:

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      AI enabled, data driven risk assessment

      HMRC will have an increased ability to ingest, link and analyse data across taxes/entities/years, as supported by AI. Inconsistencies between returns, accounts, Pillar Two disclosures and other data sources will be more visible and more likely to trigger an enquiry.

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      Pillar Two data exchange raises the bar for global consistency

      HMRC is preparing to exchange relevant Pillar Two data with other jurisdictions by the end of 2026. Multinationals must assume that group‑wide effective tax rate data, adjustments and allocations will be compared across borders, making data quality, reconciliations and narrative coherence critical.

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      Tax data foundations become strategic infrastructure

      HMRC’s gradual move away from paper and unstructured correspondence will favour organisations that can produce accurate and well‑organised data outputs from their ERP systems. So, corporate tax teams need clear tax data models aligned to ERP/consolidation systems, combined with standardised processes for data extraction, validation and enrichment.

      Tax compliance, enforcement and closing the tax gap

      What HMRC’s progress report says

      HMRC continues to prioritise closing the tax gap through a mix of digitalisation, enhanced analytics, better processes and smarter use of data. The update references additional compliance officers, tougher approaches to intermediaries who facilitate non‑compliance, and targeted initiatives across wealthy taxpayers, corporates and high‑risk behaviours.

      What tax leaders need to know

      Tax leaders should relook at their tax risk and control frameworks, making sure they can evidence reasonable care in ways that are visible to HMRC, audit committees and Boards:

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      Behaviour and governance matter as much as technical positions

      HMRC’s emphasis on failure to take reasonable care highlights the importance of demonstrable controls. All stakeholders will expect a clear articulation of how tax risks are identified, measured and managed.

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      Compliance is becoming more data centric

      The substance of cooperative compliance for large businesses is shifting towards the early sharing of structured information, transparent risk discussions supported by analytics, and clearer documentation of agreed positions.

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      Dispute prevention beats AI enabled dispute escalation

      As HMRC’s tools for case selection and pattern recognition improve, once an issue is flagged it may move quickly. Investing in data quality, reconciliations and proactive transparency is a more efficient route than managing disputes in a digital, high‑visibility environment.

      Internal transformation

      HMRC’s internal modernisation (such as consolidating systems and enhancing workforce capability) is the engine behind these external changes. While corporates will not see all of this directly, they will feel the effects in the following ways:

      • More centralised case‑working and decision‑making.
      • Increased use of standard templates, guidance and digital processes.
      • Gradual retirement of legacy processes that allowed flexibility in format/timing.

      Strategic priorities for Heads of Tax and CFOs

      Next 6–12 months

      • Baseline HMRC readiness

        Map current interactions, data flows and pain points against HMRC’s digital and AI ambitions, including Pillar Two.

      • Assess data/control gaps

        Identify where manual adjustments/fragmented systems/weak documentation create risk under enhanced scrutiny.

      • Identify quick wins

        Standardise key compliance workflows, improve audit trails for major filings, and centralise ownership and tracking of HMRC queries.

      Next 12–24 months

      • Build a tax technology and data roadmap

        Aligned to HMRC’s direction and your broader finance transformation (covering tax data models, analytics, workflow and document management).

      • Upgrade tax governance

        Embed digital interaction, AI‑enabled risk assessment and cross‑border data exchange into tax risk frameworks and board reporting.

      • Strengthen cross functional collaboration

        Formalise joint working between tax, finance, IT, risk and internal audit on HMRC‑related transformation and Pillar Two data integrity.

      Using HMRC's transformation to drive modernisation

      HMRC’s 2026 Progress Update confirms that transformation of UK tax administration is firmly underway. While some elements of HMRC’s programme are still evolving, the core direction is established: digital interaction, data‑driven compliance and a more standardised, system‑enabled operating model.

      Heads of Tax and CFOs should use HMRC’s roadmap as an external benchmark and a catalyst for accelerating tax data, controls and technology transformation, and aligning tax closely with wider finance and digital agendas.

      The key question for corporate leaders is not whether HMRC is changing, but how quickly tax and finance functions can transform in step to keep pace.

      KPMG works with organisations to design and implement tax operating model, governance frameworks and digital transformation programmes that reflect HMRC’s evolving approach and the realities of global tax transparency. Please get in touch to see how we can help you adapt to the ever-evolving expectations for tax and finance functions.

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