HMRC ordered to disclose AI

HM Revenue & Customs (HMRC) has been ordered by the First-tier Tribunal to reveal whether it uses artificial intelligence (AI) in rejecting research and development (R&D) tax credit claims. The tribunal's decision follows a Freedom of Information request filed in December 2023, by a tax professional who suspected AI involvement based on patterns in HMRC rejection letters.

HMRC initially refused to confirm or deny AI usage, arguing disclosure could aid fraudulent claims, a position supported by the Information Commissioner's Office (ICO). However, the tribunal overturned this, stating transparency is in the public interest. The tribunal noted that HMRC's silence on AI use undermines taxpayer trust. The compliance deadline is set for September 18, 2025.

Concerns have been raised regarding the fairness, accuracy, and validation of AI systems in high-value claims. There are also worries about sensitive data exposure, especially in defence-related R&D claims, should public large language models be used. The ruling highlights the need for scrutiny and transparency in HMRC's decision-making processes, potentially impacting how taxpayers and advisors engage with the tax authority.