What to ask before you trust AI with a client’s tax return

Before submitting client data to an AI tool for tax processing, verify that it validates data accuracy, integrates with HMRC, maintains audit trails, holds professional indemnity insurance, and doesn’t use your data for model training. These safeguards are part of AI vendor due diligence and separate compliant tax software from generic tools.

This blog is part of our series on 6 critical questions accountants must ask before adopting AI.

1. Does the tool validate data before it processes it?

Data entry errors are the most common source of incorrect tax returns. A good tax AI should catch these automatically by flagging incorrect dates, categories that contradict the filing status, and figures that don’t reconcile. This is where BrightBooks shines. It validates data at the point of entry and throughout processing, catching inconsistencies before they become filing errors. Generic AI tools don’t validate, they just process whatever you give them.

For example, if your client’s bookkeeper entered an expense twice, a generic AI will happily calculate it twice. A compliant platform catches that.

2. Can you see exactly what the AI decided and why?

This is a key area of AI vendor due diligence in accounting. When the software classifies a transaction, calculates a deduction, or flags something unusual, you need to understand its reasoning. Professional tax software provides a full audit trail, including what rule was applied, to which figure, at at which step. You can follow the logic, challenge it if needed, and explain it to HMRC if questioned. Generic AI rarely provides this level of detail. You get an answer, but not always the working. For tax returns, that’s a gap you cannot afford.

3. Does it integrate with HMRC and your existing systems?

MTD IT requires quarterly updates and year-end submissions that are in alignment with HMRC records. The only way to do this reliably is through software that speaks directly to HMRC’s API. Generic AI doesn’t do this, as it has no HMRC integration. BrightBooks handles this seamlessly by pulling MTD IT data directly from HMRC, reconciling quarterly updates, and ensuring your year-end figures match what HMRC already holds. Integration also matters with your clients’ bookkeeping systems. If your bookkeeping software can’t seamlessly receive digital invoices or receipts, you’re introducing unnecessary errors and wasting time.

Who is legally responsible if the AI makes a mistake?

If a generic AI misclassifies an expense and your client’s return is challenged by HMRC, who bears the cost of putting it right? You do. Your practice must defend the return, and your professional indemnity insurance may not cover losses arising from misuse of non-compliant tools. With regulated tax and bookkeeping software, the vendor carries professional liability insurance and assumes responsibility for compliance errors. They are legally accountable. This matters when things go wrong, as they sometimes do.

For further information, check out why generic AI is a professional liability for accountants.

Is your client data used to train the AI model?

Many commercial AI platforms retain and learn from the data you submit. This is a breach of client confidentiality and a potential breach of GDPR. Before using any AI tool on client data, check whether the vendor uses your data for model improvement. If they do, don’t use it. Regulated accounting software with professional compliance obligations explicitly prohibits this. Your client data stays your client’s data.

Does the software hold up in an HMRC inquiry?

The real test of using AI software for part of a client’s tax return is whether it survives HMRC scrutiny. If HMRC questions a return and asks how figures were calculated and validated, your answer needs to be bulletproof. ‘I used an AI that I trust’ is not bulletproof.

For example, BrightBooks' document capture tool, our latest AI MTD tool, enables taxpayers to maintain digital records by photographing receipts and invoices on their mobile phones. Documents are processed automatically, with VAT split and data extracted ready for review in our bookkeeping software, BrightBooks.

This content may have been developed with the assistance of AI tools. Content is reviewed by a member of the Bright team before publication. Guidance on legislation can be obtained from your industry body.