As an R&D tax consultant, we have plenty of experience submitting R&D tax relief claims and handling enquiries if they get rejected.
Part of that process is corresponding with an agent working for HM Revenue and Customs (HMRC) as they attempt to determine the true eligibility of an R&D tax relief claim.
While the agent is often identified by name, there are many letters that are sent from anonymous agents, often represented by a string of letters rather than a name.
There has been a sentiment among R&D tax consultants that these enquiries are often more challenging due to a notably different tone in the communication compared to the named agents, leading to some suspicions of AI use.
These fears are not entirely unfounded, as HMRC will soon have to reveal the extent to which they are using AI in their R&D tax relief decision-making processes.
Does HMRC use AI to reject R&D tax relief claims?
At the moment, we cannot say for sure, but it does seem quite likely.
The hesitation that HMRC have expressed when questioned on the topic could be taken as an answer in itself.
If for no other reason than to prevent speculation, HMRC should be open and transparent about the processes used to determine the eligibility of R&D tax relief claims.
This was the basis of a Freedom of Information (FOI) request that was made in December 2023.
At the time, the request was rejected by HMRC, and the Information Commissioner’s Office (ICO) supported the rejection in 2024.
However, a recent tribunal ruling has overturned these previous decisions, issuing a deadline of 18 September 2025 to comply with the order for disclosure.
Does it matter if HMRC is using AI?
AI is a mixed bag when it comes to making things more effective.
There are plenty of businesses that benefit from using specialist AI systems that are tailor-made to help deal with tedious work and free up experts to better utilise their talents.
Accountants often use such systems to handle basic admin so that they can focus more on customer service.
The problem arises when AI is used inappropriately, and this can manifest in a number of different ways.
The use of publicly available, general-purpose AI can often result in dubious results and potential security issues when confidential data is inputted.
The use of Large Language Models (LLMs) like ChatGPT would be wholly inappropriate for use in determining the eligibility of an R&D tax relief claim.
Without understanding whether HMRC use AI, and in what form it takes if it is used, speculation could run rampant about ChatGPT being used to reject valid R&D tax relief claims.
The use of AI like this also opens the doors to fraudulent claims, as the technical narrative could easily contain ‘prompt injections’ designed to trick AI systems into letting the claim pass regardless of eligibility.
Although some work has been done to mitigate the ability to tell an AI to ‘ignore previous instructions’, prompt injection remains an ongoing concern for less specialised AI systems.
There is also the matter of AI lacking the understanding and nuance needed to determine the eligibility of more complex R&D tax relief claims.
HMRC have claimed that revealing information about AI use could potentially facilitate fraudulent activities, but this in itself could be an indication that a less reliable system is being utilised.
What could this argument mean for the future of R&D tax relief?
In keeping with a trend of upcoming R&D tax relief changes, this should provide more clarity to the scheme.
It is vital we understand how HMRC are approaching R&D tax relief claims, as this can better guide the advice and support given to accountants and innovative businesses.
Anyone who cares about mitigating fraud in R&D tax reliefs should also be interested in the outcome of this tribunal ruling.
We are watching closely to find out more about the inner workings of HMRC and will be sure to update you as soon as we know more.
In the meantime, we will continue to work on supporting accountants and innovative businesses to submit eligible R&D tax relief claims and defend them from enquiries.
For R&D tax relief support you can trust, speak to our team today!
