The Promise and Perils of AI in Tax Compliance: A Critical Look by R&D Tax Credit Consultants

AI is becoming an increasingly powerful tool across all industries. From drafting emails to analysing complex data, it offers speed and convenience. But in specialised fields like R&D tax credits, where accuracy and detailed understanding are essential, it's important to take a balanced view. Not everything AI generates should be taken at face value.

The Tax Compliance Challenge: When AI Misses the Mark

In the world of R&D Tax Relief, AI has shown clear limitations. We've seen more businesses and advisors leaning on AI to draft technical reports. While these reports might look polished, they often miss the mark in accuracy and relevance.

Some businesses and their agents/accountants are using AI to make R&D claims sound more complex than they are, in an attempt to strengthen their position. This can backfire and often cause significant issues. These AI-generated reports often fail to reflect the real technical challenges or uniqueness of a project. If tax authorities like HMRC or Revenue (Ireland) examine such claims, the lack of proper supporting detail could leave companies exposed.

AI in the Hands of the Authorities: A Two-Way Street

Interestingly, it appears that many organisations are also adopting AI tools. During one compliance check from another organisation, it is believed that artificial intelligence platforms were utilised to generate an extremely lengthy, detailed and repetitive response detailing over a hundred further questions, some of which having no bearing on the subject matter.

This raises a new concern. If organisations are using AI to review reports, we must ask: what kind of instructions are being given to these systems? For example, if they  are prompting AI with questions like "Give reasons why this would not qualify as R&D," then the response could be biased against the claim. The result is not an impartial assessment, but one skewed by the prompt itself.

We should also question what platforms are being used and whether information is being stored or shared. R&D work often involves sensitive, breakthrough innovations. If companies unknowingly feed proprietary data into AI tools, there is a risk that these systems might retain and reuse that data in unrelated queries. This could lead to serious confidentiality breaches and loss of a competitive edge.

The Right Balance: Using AI Sensibly

There is no doubt that AI, when used properly, can help with efficiency. It can assist in drafting or organising information, provided it is guided by human judgment. But generating entire R&D claims using AI is risky.

AI has no built-in knowledge—it only works based on the instructions it receives. It doesn’t truly understand the context, nor can it evaluate whether something qualifies as R&D under specific legislation. This is why relying solely on AI for R&D tax credit submissions can lead to unsupported statements that crumble under regulatory review.

Companies should always maintain detailed records of who did what, when, and why in their R&D projects. While this level of record-keeping isn't always required by legislation, (depending on the tax authority), it's essential when defending a claim. That's where expert R&D Tax Credit Consultants, like the team at Momentum Tax Group, play a vital role.

Momentum Tax Group: A Human-Centred Approach

At Momentum Tax Group, we take a careful, people-first approach. We:

• Use qualified R&D Tax Credit Consultants and expert technical report writers, not AI, to draft client reports
• Have a solid process to identify whether a project genuinely qualifies as R&D
• Work with clients to understand and organise any existing records that support their claims, and to develop processes for further R&D preparation
• Protect client information and ensure no sensitive data is exposed through AI platforms
• Help clients reduce the burden of compliance reviews by preparing strong, evidence-based technological and scientific documentation

We believe that technology should support, not replace, expert human analysis—especially when dealing with the complexity and sensitivity of R&D tax credits.

The Road Ahead: Protecting R&D in an AI World

As AI becomes more common in both preparing and reviewing R&D tax credits, businesses must be smart about how they use it. There’s too much at stake to hand over responsibility to a tool that doesn’t truly understand context or consequences.

The key lies in asking the right questions: How much AI is being used? How unbiased are the prompts used to review claims? What platforms are involved? And most importantly—how is a company’s confidential information protected?

Forward-thinking businesses are choosing to partner with R&D Tax Credit Consultants who combine deep technical understanding with careful data handling. Momentum Tax Group ensures that your R&D claims are not just compliant—but also secure, well-documented, and based on accurate insight into the qualifying activities.

Smart people work with smart people.

If you'd like a no-obligation review or just a second opinion on your tax incentive claims, contact Momentum Tax Group at our head office on 028 9140 4030, or our Dublin office on 01 2654090 or email tax@momentumtaxgroup.com.