A UK tribunal is compelling HM Revenue & Customs (HMRC) to reveal information on the use of artificial intelligence in its decision-making regarding R&D tax credit applications.
Order for Information Disclosure
HM Revenue & Customs has been ordered to disclose whether it has used artificial intelligence to reject tax credit claims. A first-tier tribunal ruled that the tax authority must confirm if AI was involved in R&D tax credit application determinations following a Freedom of Information request filed by tax professional Tom Elsbury in December 2023.
Public Interest and Trust
The tribunal noted that HMRC’s refusal to confirm or deny AI's use in R&D claim assessments 'reinforces the belief' that such tools may be in use 'perhaps in an unauthorized manner,' thus undermining taxpayers’ trust in HMRC’s treatment of claims. Judge Alexandra Marks described Elsbury’s arguments as 'compelling' and found that the public has a right to know if AI plays a role in tax decision-making.
Risks of AI Usage
Elsbury expressed concerns about the potential use of public large language models, such as ChatGPT, by HMRC officers when assessing claims. He noted that if such tools were used, commercially sensitive information expected to remain confidential could be disclosed. These risks could be particularly severe in industries related to national defense, as R&D tax relief claims may involve sensitive details about the development of weapons systems for the UK Ministry of Defense.
Revealing information about the use of AI in tax decisions is crucial for maintaining trust in HMRC and ensuring proper handling of legitimate R&D tax credit applications.
