HMRC published its Strategic Approach to Third-Party Software on 26 March 2026, establishing a comprehensive framework for managing the ecosystem of software products that integrate with UK tax and customs systems. The strategy addresses the market's growth from 600 to nearly 3,000 providers over the past decade, with almost 90% of digital tax returns now submitted through third-party software.
Partnership and Collaboration Framework
The approach introduces structured co-creation processes where software providers contribute to policy design from the earliest stages. HMRC will establish dedicated engagement channels and working groups to ensure provider input shapes requirements before implementation. A new software channel will consolidate guidance, security requirements, and best practice materials to support providers of all sizes.
The framework includes exploration of confidential engagement mechanisms for market-sensitive issues, while maintaining competitive fairness through broad stakeholder representation. Regular collaboration will span policy teams, operational units, and technical delivery to ensure consistent provider involvement.
Quality Standards and Oversight
HMRC will develop enhanced standards for integrated software focusing on accuracy, reliability, security, and customer protection. A unified registration system will replace current fragmented approaches, creating consistent expectations across all tax regimes. Proportionate oversight mechanisms will include pre-release testing, post-release monitoring, and data analytics to identify performance patterns.
The strategy establishes clear enforcement pathways, including targeted support for non-compliance, temporary restrictions on system access, and potential suspension of integration privileges for products that compromise tax system integrity. All actions will align with HMRC Charter commitments on fairness and transparency.
Innovation and Technical Environment
HMRC will create structured processes for evaluating innovation proposals, with particular focus on artificial intelligence applications in tax software. The approach includes exploring commercial routes for developing features that benefit tax administration but lack market incentives. A single transparent mechanism will handle proposals for new APIs and data access requests.
Technical improvements will include infrastructure upgrades for expanded API capacity, comprehensive testing environments that better reflect live service conditions, and long-term delivery plans providing multi-year visibility of upcoming changes. Enhanced incident communication and diagnostic capabilities will support provider planning and customer support.
Customer Empowerment
The strategy addresses customer choice and data control through neutral information provision about available software types and functions. HMRC will work with providers to reduce switching barriers through improved data portability and interoperable formats. Enhanced customer data authorisation mechanisms will provide more flexible, use-case-based permissions while maintaining security standards.
Context
This strategic approach represents HMRC's most comprehensive framework for software provider relationships, building on Making Tax Digital's foundation as tax administration becomes increasingly software-dependent. The strategy supports HMRC's 2030 digital-first transformation goals while establishing the governance structures needed to manage a market critical to UK tax compliance. Implementation begins in 2026 with a detailed delivery plan scheduled for publication by Spring 2027.
