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Aipedia: Tax advisers
AI can help draft R&D claim narratives, but generic or overstated text increases enquiry risk and the adviser carries the consequences if relief is clawed back. R&D work may already attract close scrutiny from insurers.
Part of: AI in Tax advisers
In short
R&D tax relief claims usually rest on a technical description of the project and an analysis of qualifying costs. Generative AI is good at producing fluent technical prose, which is exactly the problem: narratives can become generic, repetitive across clients, or claim more than the project achieved. If HMRC challenges the claim, relief may be withdrawn with interest and penalties. Clients may then claim those losses and the adviser's fees. The PCRT AI guidance requires accuracy and accountability, and the Standards for Tax Planning still apply. PI may respond, but R&D work may be scrutinised closely by insurers.
Advisers use AI to turn interview notes and engineers' emails into a structured technical narrative, to map activities to the relevant guidelines, and to classify costs such as staff time, software and consumables. Some tools generate a full draft report from a short brief. That is efficient for a firm handling many claims, but it encourages templates and stock phrases that do not reflect a specific project.
Illustrative scenario: a firm uses AI to draft narratives for several software clients. The text describes advances in broad terms that would fit almost any development project. HMRC opens an enquiry into one claim and asks the client's developers to explain the work. Their account does not match the narrative. The relief is reduced and HMRC charges a penalty. The client says it relied on the adviser's expertise and seeks the lost relief, the penalty and its fees back.
Cost analyses carry their own risk: an AI classification that treats ineligible costs as qualifying, or double counts subcontractor costs, can inflate a claim without anyone noticing.
The PCRT AI guidance recommends an engagement letter statement on AI use (para 1.3) and considering disclosure of actual use when work is delivered. For R&D work this matters more than usual. The client signs off the claim and is responsible for it in HMRC's eyes, so it needs to know that the narrative started as an AI draft and that its own technical staff must check it line by line. A short covering note that explains what the adviser verified, and what only the client can confirm, also helps if the claim is later disputed.
Integrity also cuts the other way. If a firm markets its R&D service as specialist, bespoke work, presenting templated AI text as individually researched analysis risks overstating the work, which para 1.4 of the guidance warns against.
A client's claim for negligent preparation of an R&D claim is a civil liability claim, and the CIOT/ATT PII Regulations require cover for all civil liability from tax services. Whether relief that was never properly due is a recoverable loss is often disputed, while penalties, interest and fees may be. Some insurers may ask detailed questions about R&D work, fee structures and volumes, and contingent fees can affect terms. Misdescribing your R&D activity on a proposal risks a fair presentation problem. See R&D tax advice claims and R&D tax credit PI cover.
Related: AI-drafted advice reports and AI-drafted HMRC enquiry letters. Back to the AI in tax advice hub.
Apex arranges PI for tax advisers who handle R&D claims. A broker can help you present your R&D work and AI use accurately so cover is not undermined later.
Not in itself. The PCRT AI guidance allows AI use if output is checked and the member stays accountable. The risk lies in generic or overstated narratives. Each narrative should reflect the actual project and be confirmed by the client's technical staff.
It depends. Relief that was never properly due is often argued not to be a loss. Penalties, interest and fees paid for a defective claim are more likely to be recoverable, depending on the facts, the engagement terms and the reason relief was refused.
They may. Proposal forms may ask about the share of fees from R&D claims, fee arrangements and quality controls. Answers should be accurate and include how AI is used, so that the risk is fairly presented.
Tell us about your firm and the work you do. A broker will review how your current PI treats AI-assisted work, or arrange new cover. No fee for a quote. Or call 0117 325 0027.
Start a PI quote Request a callbackApex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales, company number 07014570. This page is general information about how AI is used in the profession and how insurance may respond. It is not legal, regulatory or insurance advice on your circumstances, and it does not guarantee that cover will be available or on what terms.
