Friday, August 8th, 2025, 8:16am
| update:
Friday, August 8th, 2025, 8:17am
The court held that if HMRC uses artificial intelligence (AI) in a critical decision related to granting research and development tax credits, it must be disclosed.
Tom Elsbury, a tax expert who founded the novel for the Expert Tax Relief Software Platform, submitted a Freedom of Information (FOI) request in December 2023.
But Judge Alexandra has made the mark in the first stage courthouse and says his arguments in favor of transparency are “convincing” and that the original decision should be overturned.
Elsbury believed that government tax enforcement agencies used AI as the basis for their decision to block companies' access to tax easing.
He told the Financial Times that he should know that “if AI is making a tax credit decision or decision, or that it is making a corporate tax credit decision,” and that he should know whether penalties are being communicated based on the decisions that have been generated.
Elsbury added: “R&D tax credits affect a variety of industries, including industries related to the defense and military, and may include details on innovative defensive weapons systems developed within the UK on behalf of the Ministry of Defense.
“This can have devastating consequences.”
HMRC Tax Credit crackdown
The HMRC initially rejected FOI requests from tax experts in a decision endorsed by the Information Commission (ICO) in 2024, on the grounds that information could help false claimants.
According to government guidance, the R&D tax credits are intended for projects that “seek advances in the science or technology field by resolving scientific or technical uncertainty.”
The tax credit scheme was introduced by the Blair government in 2000 and helped compete to boost small and medium-sized enterprises (SMEs).
Following a series of fraudulent applications and grants made incorrectly, HMRC has launched a tax credit crackdown.
In May, 33 inquiries were made by the Pro Football Club.
The ICO at the time said, “We received and respected the court's decision on this issue. Checking the details is not appealing.”
Following the court's ruling, the HMRC will need to comply with its request for freedom of information until September 18th.
HMRC said: “We are reviewing our decisions carefully and are considering the next steps.”
