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Quarterly news:

Spring 2024

AI generates a cocktail of fake cases against HMRC

We bring you news of a case at the tax tribunal where HMRC sought penalties for a taxpayer’s failure to notify liability to CGT on the disposal of a residential property.

The property had been let out to tenants and the taxpayer held that they had a reasonable excuse for not notifying HMRC. During the hearing, it emerged that they had — unknowingly — based their argument on fake cases generated by an AI system like ChatGPT.

This had picked up frequently-occurring surnames from past tribunal cases, frequently-occurring phrases, and created a cocktail blend of different first names, different dates and different verdicts.

The judge noted that this appeared to be an instance of ‘hallucination’, where an AI system produces ‘highly plausible but incorrect results’. Unsurprisingly, HMRC won the case.

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