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Aipedia: Tax advisers
AI can help compute capital gains on property, but advisers must check the inputs, reliefs and the 60-day reporting deadline, because a missed step quickly leads to penalties. Property gains depend on facts a tool cannot see, such as occupation history and ownership shares.
Part of: AI in Tax advisers
In short
Gains on UK residential property must usually be reported and paid within 60 days of completion. Advisers use AI tools to pull purchase and sale figures, apportion costs and draft computations. Errors include wrong acquisition costs, reliefs missed or overstated, and deadlines not diarised because the tool did not flag them. Harber v HMRC, the case where a taxpayer cited AI-invented decisions, began with a failure-to-notify penalty on CGT from selling a let house. Clients who face penalties may claim them from the adviser, and PI usually responds subject to its terms.
Typical uses include extracting completion statement figures, estimating base costs, identifying allowable enhancement expenditure, calculating private residence relief periods and drafting a computation and covering note. AI is also used to answer quick client questions such as whether a sale is taxable. Each of these depends on facts, such as occupation history, ownership shares and earlier elections, that a tool cannot know unless the client provides them and the adviser checks them.
GOV.UK states that Capital Gains Tax on UK residential property must be reported and paid "within 60 days of completing the sale", with interest and penalties for late reports. A chatbot asked about deadlines may give an older rule or a deadline that applies to a different situation.
Harber v HMRC concerned a taxpayer who sold a rental house in 2018 and did not notify HMRC of the CGT liability. HMRC charged a failure-to-notify penalty set at 20% for a non-deliberate failure. On appeal she relied on nine tribunal decisions that turned out to be AI-generated, and the appeal was dismissed. The case is now cited in the PCRT AI guidance.
Illustrative scenario: a client sells a flat they once lived in and later let. The adviser uses AI to prepare the computation from the completion statement and a short client email. The tool applies relief for the whole ownership period instead of the qualifying periods, and the covering note does not mention the 60-day report. Nobody diarises it. HMRC later issues late filing penalties and an assessment for the extra gain, with interest. The client claims the penalties and interest from the adviser.
Other errors include treating joint owners as sole owners, missing a loss available to set against the gain, and confusing exchange with completion dates.
A claim for losses caused by a negligent computation or missed deadline is a civil liability claim under the CIOT/ATT PII Regulations. PI usually responds subject to the excess and terms. The client's extra tax on a correctly computed gain is not usually a loss, because it was always due. Late penalties and interest that proper advice would have avoided may be. Who was responsible for the 60-day report matters, so the engagement letter scope is important. See PI claims examples for tax advisers and how much PI cover tax advisers need.
Related: AI in Self Assessment returns, AI tax research and fake case law and the AI in tax advice hub.
Apex arranges PI for tax advisers handling property and CGT work. A broker can check your limit and excess against the size of property claims you could face.
GOV.UK says you must report and pay any Capital Gains Tax on UK residential property within 60 days of completing the sale. Interest and penalties can apply if the report or payment is late.
No. Ms Harber was unrepresented. She was appealing a failure-to-notify penalty on CGT from selling a rental house and cited nine decisions that did not exist. The tribunal found they had been generated by AI and dismissed the appeal.
Not without checking. Relief depends on occupation history, periods of letting and other facts the tool may not have. Treat the result as a junior's draft, as the PCRT AI guidance suggests, and check each period against the client's documents.
Possibly, if you were responsible for the report and missed the deadline through negligence. Penalties and interest may form part of the loss. The engagement letter will be important in deciding who had responsibility for filing.
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