HMRC now required to disclose whether AI was used in assessing R&D claims

Artificial Intelligence (AI) is increasingly part of business operations, but what happens when it is used by HMRC in tax enquiries?

A recent First-tier Tribunal (FTT) case, Elsbury v The Information Commissioner [2025] UKFTT 915, has shed light on this question. After over two years of HMRC and the Information Commissioners’ Office contesting a Freedom of Information request on the subject, the Tribunal ruled that HMRC must disclose whether it had used AI in compliance and enquiry activities relating to Research & Development (R&D) tax credit claims.

For businesses that rely on R&D tax relief, this decision could mark an important step towards greater transparency.

Concerns were raised after unusual features were noticed in HMRC’s correspondence, such as American spellings, unusual punctuation and responses that did not align with the facts of the claim. These led to the belief that AI models may have been used to generate enquiry letters.

When clarification was requested, HMRC initially acknowledged holding relevant information but declined to disclose it. Later, it adopted a stance to say it could “neither confirm nor deny”.  Ultimately, the matter was escalated to the Tribunal for resolution.

Businesses rely on HMRC to handle tax claims fairly and consistently. If AI tools are being used to draft enquiry letters or assess claims, taxpayers are entitled to clarity about how their submissions are being reviewed.  At the very least, HMRC’s response to this ruling shows at the very least that the R&D Compliance team are included in HMRC’s AI roadmap, however, details have not been provided on limiting the informal use of AI tools by caseworkers.

Many businesses already feel that HMRC R&D enquiries are on the rise. While impact assessments are being conducted on the potential use of this technology, if HMRC is using AI to speed up reviews, there is a risk that errors or irrelevant points could creep into communications. This could cause additional stress and delay for businesses trying to secure much-needed financial relief.

This case highlights the importance of submitting a well-prepared R&D claim with accurate, detailed evidence and should consider the benefits of avoiding using AI in the preparation of their own claims. Businesses should also be alert to any correspondence from HMRC that seems inconsistent or unclear.

For guidance on strengthening your claim, read our insight on avoiding common R&D tax relief pitfalls.  

This ruling does not mean AI is confirmed to be in use at HMRC, only that the department must disclose its position. However, it does show that the landscape is evolving.

Ensure your R&D claim is clear, defensible and supported by strong evidence. This reduces the likelihood of drawn-out enquiries.

Working with a trusted adviser can help you navigate HMRC enquiries effectively and avoid common pitfalls. At Azets, we have R&D tax relief specialists who can support you with the full claim process.

The Elsbury case is an important milestone in ensuring transparency over how HMRC handles R&D claims. Whether or not AI is being used, businesses should continue to focus on preparing robust claims and staying alert to changes in HMRC’s approach.

We have supported many businesses through an R&D tax relief submission, making sure they are fully complying with all HMRC requirements and making their case as robust as possible. If you are considering an R&D claim or have encountered issues with one you are in the midst of trying to process, please get in touch with our specialist R&D Tax Relief team.