Businesses that rely heavily on artificial intelligence (AI) to prepare their research and development (R&D) tax claims could find their claims rejected by HMRC if the process lacks human oversight.
That’s the warning from Blick Rothenberg, a leading audit, tax and advisory business.
The government’s recently announced AI Opportunities Action Plan provides “opportunities and risks” for R&D claimants, says Eli Theokary, a partner and R&D specialist at the firm. A growing number of providers are using AI-based tools to compile and submit R&D claims as well as additional information forms, sometimes falsely claiming to have special privileges with HMRC.
Theokary highlights concerns about the quality of AI-based R&D applications, warning that many appear to be “wordy but lacking in substance”, making them vulnerable to scrutiny at HMRC. She points out that some large, volume-focused R&D companies have actually gone out of business over the past four years because of the poor quality of their work and follow-up investigations they were unable to defend.
Although AI can streamline aspects of the R&D claims process, Theokary stresses that the role of a knowledgeable advisor “cannot be underestimated.” Even accurate data fed to AI can lead to errors and lies — known as “AI hallucinations” — that threaten the integrity of the claim. HMRC’s attempt to rely on AI to verify facts during compliance inquiries has similarly encountered this problem.
On a more positive note, Theochary points out that AI can be harnessed to effectively summarize complex technical information, identify key technologies, conduct research, and manage large accounts. However, it stresses that expert input is essential to ensure any AI-generated content is authentic, relevant, and ready for HMRC scrutiny.