When is tax advice, not tax advice?

When is tax advice, not tax advice? We believe the answer is when it’s given by ChatGPT!

As professional tax advisers we provide solid, qualified tax advice. Our qualification is based on years of studying, experience, and hours and hours of research and reading of tax law and previous tax cases.

So, can a layperson, with no tax background, defend their position against HMRC at a First Tier Tribunal without engaging a tax professional or paying for qualified tax advice by using the power of AI?

Well, in a recent case, a taxpayer, decided that they would do just that. The outcome had our tax team intrigued, we asked them for the full story…

Harber v HMRC [2023] TC09101 is probably the first reported case of its kind in the UK. The appellant used ‘artificial intelligence’ (AI) in order to aid and assist their appeal against penalties raised by HMRC. However, this did not work in their favour and took an unexpected turn which nobody could have predicted, not even AI!

The focal point of the case was the taxpayer’s failure to report Capital Gains Tax (CGT) on the sale of a residential property. HMRC had assessed them for underreported gains related to undeclared rental income and imposed penalties for the failure to notify.

To further support their defence it was revealed that they had relied upon AI-generated content. The First Tier Tribunal (FTT) discovered that the Artificial Intelligence involved had fabricated the cases cited in the taxpayer’s appeal which were crucial to their defence.

Interestingly, similar issues had arisen with ChatGPT before. The FTT cited the US case of Mata v Avianca 22-cv1461(PKC), where lawyers attempted to use fake cases generated by ChatGPT. The lawyers had submitted summaries of court decisions, and when asked for the full judgments, ChatGPT created fictitious texts. This deception was discovered by the Judge, who noted inconsistencies not typical of actual court decisions.

In this case, the AI failed to distinguish between the offenses of failure to notify and late filing, generating a fictitious list of cases used in their appeal against tax penalties. The AI even employed US spelling in British judgments and repeated certain phrases across different cases, raising suspicions.

The FTT, after a thorough review, established that the taxpayer was unaware that the cases in their defence were fabricated and did not exist. It was found that they lacked the knowledge to verify case law using legal websites. The FTT conclusively determined that the cases in their defence were not authentic FTT judgments but had been generated by an AI system, such as ChatGPT.

Ultimately, the FTT dismissed her case based on the facts and actual case law, despite the taxpayer’s poor mental health. The evidence presented to the FTT failed to convince them that the taxpayer had a reasonable excuse for not declaring CGT. The tribunal noted that the taxpayer was leading a normal life, collecting rental income, and there was no obstacle preventing them from seeking proper tax advice. Plus they should have refrained from placing their defence upon something produced by Artificial Intelligence.

Consequently, the taxpayer’s case was dismissed.

If you are the subject of an HMRC tax investigation, we have a team at RPGCC with both qualification, experience and that human touch which means that we are well placed to assist you in your defence at an FTT hearing. Putting this into simple terms if a person has a problem with their roof, they do not call a plumber. If you have a problem with your electricity, you do not call a hairdresser, so why when you have a tax issue would you call anyone other than a tax expert!

If you would like to speak to a member of our tax team about tax investigations or tax hearings please contact us or telephone us on 020 7870 9050 or visit our webchat in the bottom right corner to speak directly to a member of our team.

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