AI versus HMRC

First published on 18 January 2024 by Alastair
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You would have to have been living on another planet not to be aware of the impact AI is having on the world.   ChatGPT can seemingly conjure up everything from ad copy to computer code in a few seconds, while creative AI software can create imagery and logos in a similarly truncated time.  Jobs will be – are being - lost.

However, another thing that AI has lost is a legal case, as Felicity Harber a UK based taxpayer, found out to her detriment at a first-tier tribunal. 

Felicity was appealing against an HMRC penalty she received due to her failure to notify the tax authority of unpaid capital gains tax on property sale. The tax amount owed was £3,265.11 and the basis of the appeal was on nine specific cases which, she claimed, supported her position.  Unfortunately, it transpired that she was given this supporting evidence by “a friend in a solicitor’s office.”  Even more unfortunately, these ‘cases’ had been created by AI and were fake. And while Felicity did not know this when she submitted them, that, of course, did not pass muster with the tribunal.  

The judge on the case, Anne Redston, stated in regard to the fake cases that “providing authorities which are not genuine and asking a court or tribunal to rely on them is a serious and important issue.” As a result, the appeal was thrown out and the tax will have to be paid.

Whilst on this occasion the judge accepted that Felicity was not aware the cases were fake at the time of petitioning the tribunal, it is still important to know that the improper use of AI technology to support an appeal could have serious consequences. As the tribunal noted (in what seems to be a statement of the obvious!) “that does not mean that citing invented judgments is harmless.”  Be aware… sometimes, there is no accounting for AI.

Callum McKinnon, M&S Accountancy and Taxation

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