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Aipedia: Tax advisers
AI can extract data and pre-populate Self Assessment returns, but the adviser must review the result, because missed income or reliefs become the adviser's error. These are high-volume jobs where small errors repeat.
Part of: AI in Tax advisers
In short
Tax practices increasingly use AI to read bank statements, P60s, dividend vouchers and rental summaries and feed figures into Self Assessment software. The PCRT AI guidance includes scenarios on relying on AI-generated client data and on tax software running without human review. Typical errors are missed income sources, duplicated items, misclassified expenses and reliefs not claimed. When HMRC charges penalties and interest, clients may claim them from the adviser. PI usually responds to these compliance negligence claims subject to the excess and terms, though tax the client always owed is not normally a loss.
AI tools now sit inside many practice and bookkeeping platforms. They read uploaded documents, categorise transactions, flag likely allowable expenses and pre-fill return fields. Some generate a draft return for review. For a practice handling hundreds of returns in January, the appeal is obvious. The risk is that review becomes a quick glance at a total rather than a check of the underlying data.
Extraction quality depends heavily on what the client uploads. Poor scans, password-protected PDFs, foreign-language statements and handwritten notes all reduce accuracy, and the tool may not say when it has skipped a page. A return built from incomplete data can look perfectly tidy. The PCRT guidance asks members to understand the tool's data sources (paras 2.1 to 2.4) for this reason: knowing what the tool cannot read is part of competent use.
Illustrative scenario: a client sends a bundle of documents including statements from two bank accounts. The extraction tool reads one account and not the other, which held interest and a share of rental income. The draft return looks complete and the totals seem reasonable, so it is approved and filed. Two years later HMRC identifies the missing income, assesses the tax and charges interest and a penalty. The client says they provided everything and the adviser missed it.
Other patterns: a gift aid or pension relief not claimed because the tool did not recognise the document, capital expenditure claimed as revenue, or a disposal that should have triggered a CGT report. See AI for CGT and property.
Compliance errors can lead to tax adviser PI claims. Under the CIOT/ATT PII Regulations firms of members in practice need cover for all civil liability from tax services, and the minimum terms set limits and a maximum excess of £30,000 per principal. Many return errors fall below or near the excess, so firms often pay small claims themselves. In general, the tax itself is not a loss because it was always due. Penalties, interest and extra fees may be recoverable if they would not have arisen with proper care, depending on the facts and wording. HMRC enquiry costs may sit better under tax investigation insurance than PI. See PI claims examples for tax advisers.
Related: MTD quarterly updates and AI. Back to the AI in tax advice hub.
Apex arranges PI for tax practices with high-volume compliance work. A broker can help you weigh the excess level against your typical claim size and check how AI-assisted preparation is treated.
Yes, as long as a competent person reviews it. The PCRT AI guidance treats output like a junior colleague's work and includes a scenario on tax software running without human review. The member remains accountable for the return.
Possibly, if the penalty resulted from your negligence rather than the client's own failure to provide information. Penalties and interest may form part of a claim, while the underlying tax usually does not, because it was always payable.
The PCRT AI guidance recommends transparency, including an engagement letter statement (para 1.3). Telling clients also helps in practice: if they know documents are machine-read, they are more likely to flag unusual items and confirm that the return is complete before it is filed.
Usually yes. CIOT/ATT rules allow an excess of up to £30,000 per principal. Many compliance errors are below that, so firms commonly settle them directly. Notify insurers of anything that could grow, even if you expect to pay it yourself.
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.
