Businesses that rely heavily on artificial intelligence (AI) to prepare their research and development (R&D) tax claims could see their claims rejected by HMRC if the process lacks human oversight.
That’s the warning from Blick Rothenberg, a leading audit, tax and business advisory firm.
Ele Theochari, a partner and R&D specialist at the firm, says the government’s recently announced AI Opportunities Action Plan presents both “opportunities and risks” for R&D claimants. A growing number of providers are using AI-based tools to compile and submit R&D claims and supplementary information forms, sometimes falsely claiming that they have special privileges with HMRC.
Highlighting concerns about the quality of AI-driven R&D submissions, Theochari warns that many of them ‘appear wordy but lack substance’, making them vulnerable to HMRC investigation. She notes that a number of large, volume-oriented R&D companies have already gone bankrupt in the past four years due to poor quality of their work and follow-up studies that they could not defend.
While AI can streamline aspects of the R&D claims process, Theochari emphasizes that the role of an expert advisor “cannot be underestimated.” Even accurate data fed into AI can result in errors and falsehoods – known as “AI hallucinations” – that compromise the integrity of a claim. HMRC’s own attempt to rely on AI for fact-checking during compliance queries has also encountered this problem.
On a more positive note, Theochari points out that AI can be used to effectively summarize complex technical information, identify basic technologies, conduct research and manage large calculations. However, she emphasizes that expert input is essential to ensure that all AI-generated content is factual, relevant and ready for HMRC investigation.