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AI Causes Confusion in Tax Tribunal

13 Dec 2023

Harber vs HMRC: AI Causes Confusion in Tax Tribunal

At 20:20 Innovation we’re huge advocates of digital technologies when they are to the benefit of accountants like you. So much in fact that we offer a tech-talk service to accountants to discuss software, technology and processes.

In this case, however, an appellant lost an appeal against a £3,000 tax penalty having used ChatGPT as part of her legal defence.

This 20:20 Innovation article looks at the case of Harber vs HMRC and how Ms Harber’s use of AI proved extremely problematic.

If you’re interested in technology and want to know more about how technology and software can help you in your accountancy business, why not join tech-talk today?

Harber vs HMRC

The Harber vs HMRC First-Tier Tribunal case (TC09010 December 2023) is a very real illustration of how AI tools like ChatGPT can unintentionally land you in hot water. The case is proof that this fantastic tech can bring both opportunities and challenges. Harber vs HMRC marks the first significant appearance of Artificial Intelligence (AI) alongside tax law and also emphasises the role of AI in professional domains.

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What happened in the Harber vs HMRC case?

Harber vs HMRC is a graphic illustration of the growing prominence of AI in all aspects of daily life, including legal tax proceedings. It also serves as a reminder that the technology is in its infancy. This is the double-edged sword.

The case concerned an appeal against a ‘failure to notify’ penalty. Ms Harber believed she had a reasonable excuse for failing to notify HMRC of her CGT liability. She provided the Tribunal with a written response that detailed no fewer than nine previous First-Tier Tribunal decisions in which the appellant had successfully appealed penalties in circumstances similar to those of Ms Harber.

Unknowingly to Ms Harber, the cases generated by AI were completely fictitious, which highlights the critical need for scrutiny in AI's application, especially in legal matters. The Tribunal decision highlights how citing invented judgements is not harmless; it causes the Tribunal and HMRC to waste time and public money.

Often, when discussing ChatGPT application in the accounting world, we refer to prompt engineering as a critical skillset. This case serves as a crucial reminder of AI's potential to innovate as well as its capacity to mislead if not properly managed.

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Do humans need to oversee AI integration?

This landmark case emphasises the importance of human oversight in the use of AI technologies like ChatGPT. It's a call to action for professionals to not only embrace AI but also to rigorously review and check its outputs as you would a junior. After all, this technology is still learning and developing.

Does Tech-Talk discuss AI?

20:20 Innovation have also created an AI Usage Policy for all our members to guide your team on when and how to use AI tools responsibly. This policy is part of our commitment to harnessing AI's potential while safeguarding against any pitfalls you may come up against.

To optimise the use of AI tools like ChatGPT, it's crucial to understand the art of effective prompting. Tech Talk provides invaluable insights and examples of prompts that can help in eliciting the best output from AI. These resources are instrumental in preventing AI 'hallucinations' – instances where AI generates plausible but incorrect information, as was the case with Ms Harber.

To delve deeper into this topic, we are excited to be hosting a webinar in early 2024, focusing on the vital role humans play in leveraging such technologies effectively and responsibly with the aim to help you re-evaluate the skills needed within your practice.

If you would like more information about joining 20:20 Innovation why not book a free 30-minute demo with our team today or call us on +44 (0) 121 314 2020.

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