Business tax chatbot

What do you make of the answers it's providing?

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Hi all,

After the initial hype around artificial intelligence and its potential applications to accounting work, a few tools have started to emerge from the undergrowth. One of them is Tax Terrapin from business account provider ANNA Money, which is a chatbot trained on HMRC documentation to provide up-to-date answers to business tax questions.

I'd be interested in hearing your thoughts on the tool, which you can find via this link. They've said they're happy to receive a teardown, so don't hold back ;-)

What do you make of the answers it's providing? And what do you think about the assertion from AI tool developers that in time, there will be no need for accountants to memorise and store large amounts of specific tax information, and instead spend time working with businesses more generally?

Thanks as always,

Tom

Replies (30)

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By Matrix
28th Sep 2023 07:08

It looks great Tom. I expect it would be useful for the DIY visitors who post on here.

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By possep
28th Sep 2023 08:24

I wouldn't use it or trust it if ANNA Money are behind it. ANNA Money has an online basis period calculator. I used it and it gave the wrong result. I was using it to check my calculations out of interest.

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VAT
By Jason Croke
28th Sep 2023 08:25

It's very early stages for AI I think.

Sure, eventually AI will have all the reference books and legislation in its brain and will know the answer to everything and can cross reference several sources to make sure the answer it gives is based on valid legislation or guidance.

But the answer is the easy bit, the hardest bit is asking the right questions and for now, AI is very much focused on answers, not questions, indeed, most AI systems wait for the user to input their query and then it can produce the desired response.

The expertise of a tax consultant or Accountant is, in my mind, twofold. Firstly, asking the right questions to probe and understand the actual problem and secondly, using empathy and attitude towards risk to drive the answer.

Can I split my business to avoid VAT? Well the law says you can split your trade but if you have too many inter-connections then HMRC could attack. One client might want to take the risk, another client might not, both outcomes are equally correct.

I'd love to see AI get it's head around things like whether I should stay a sole trader or incorporate, or whether I'm entitled to claim 2 different types of relief at the same time when reconstructing my business.

Thanks (6)
Replying to Jason Croke:
Ivor Windybottom
By Ivor Windybottom
28th Sep 2023 10:11

I tried Anna, giving it the question "Can I split my business to avoid VAT?"

And this was the answer:
While it might seem like a good idea to split your business to avoid VAT, it's important to note that the UK tax authorities (HMRC) have rules in place to prevent such practices, known as 'fragmentation'. Fragmentation is where a business is artificially divided into smaller parts to stay below the VAT registration threshold. If HMRC determines that your businesses are closely linked in terms of services, management, ownership, or location, they may treat them as a single entity for VAT purposes.

The VAT registration threshold in the UK, as of the current date, is £85,000. This means that if your combined taxable turnover from all your businesses exceeds this amount, you will need to register for VAT.

As per the VAT Notice 706 on partial exemption, if your business makes both taxable and exempt supplies, you must keep separate records of your exempt sales and details of how you've worked out how much VAT to reclaim. This is important to ensure that you are correctly accounting for VAT and not under or over-claiming.

If you are considering splitting your business, it's crucial to understand the implications and potential risks involved. It's always recommended to seek professional advice before making such decisions.

In terms of VAT groups, as per VTOGC5200, a partly exempt VAT group acquiring a business as a going concern needs to ensure that the value placed on the assets is realistic. The consideration must be apportioned between those assets on which tax is due and the other assets. This apportionment must be fair and reasonable.

Lastly, as per VATREG08150, if two or more persons join together in a business enterprise or venture, their activities for VAT registration purposes will fall into one of two scenarios: they create a partnership, or the terms of the agreement fall short of creating a partnership. In the latter case, the venturers should account for their own share or portion of the supplies and costs in respect of the joint venture under their existing VAT numbers.

While it's technically possible to split a business, doing so to avoid VAT can be seen as fragmentation, which is not allowed by HMRC. If your combined taxable turnover from all your businesses exceeds the VAT registration threshold, you will need to register for VAT. If you're considering this, it's recommended to seek professional advice to understand the implications and potential risks.

Useful links:
1: https://gov.uk/hmrc-internal-manuals/vat-transfer-of-a-going-concern/vto...
2: https://gov.uk/hmrc-internal-manuals/vat-registration-manual/vatreg08150

What do you think??

Thanks (2)
Replying to Ivor Windybottom:
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By Gone Sailing
28th Sep 2023 18:01

disaggregation

Thanks (1)
Stepurhan
By stepurhan
28th Sep 2023 08:41

Why did they train it on HMRC documentation? As has been established numerous times on here, HMRC documentation and the law do not always align.

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Replying to stepurhan:
VAT
By Jason Croke
28th Sep 2023 11:01

stepurhan wrote:

Why did they train it on HMRC documentation? As has been established numerous times on here, HMRC documentation and the law do not always align.


Because it's not truly intelligent, it's just pulling facts from various sources, checks that at least 2 out of 3 sources say the same thing, therefore must be right. We as humans do exactly the same thing, Googling a query or using Croner/Lexis or books to find a conclusive answer but we also apply our experience and savvy, and it's that savvy (whatever the hell that is), that makes all the difference.
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Replying to Jason Croke:
Stepurhan
By stepurhan
29th Sep 2023 13:06

Jason Croke wrote:
Because it's not truly intelligent, it's just pulling facts from various sources, checks that at least 2 out of 3 sources say the same thing, therefore must be right.

Maybe I missed something, but the post above indicated it was trained solely on HMRC documentation. If it is using 2 or 3 sources saying the same thing, that makes it more reliable than relying on HMRC alone.
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paddle steamer
By DJKL
28th Sep 2023 09:45

Unless it makes coffee and brings me a biscuit it is useless- dishwashing would also be useful and given I do everything here, including cleaning kitchen and bathroom plus hoovering offices, covering all this in one device would be useful. Must deal with stairs- when I was younger I thought stairs thwarted Daleks but now I know this is in fact not the case.

I pretty much need a robot which does all these and gives me some tax knowledge as well, it could also add legal knowledge etc and current affairs , good sense of humour would be welcome when taking the p*ss out of politicians. A GPP would also not go amiss as it gets lonely working all by yourself and if it could knock out a decent game of chess that would help when I stop for lunch. Serving lunch would also be useful, as only a microwave available so I tend to stick to cold meats , cheeses and olives and in the summer have with a heavily diluted shandy.

So, there is the wishlist, if somehow it could also answer all calls from utility companies and resolve all issues with their accounts I would divorce my wife and marry the AI.

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Replying to DJKL:
Pile of Stones
By Beach Accountancy
29th Sep 2023 09:44

Marvin lives!

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Replying to DJKL:
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By Tax Dragon
29th Sep 2023 09:56

DJKL wrote:

I would divorce my wife and marry the AI.

If it's at all intelligent it would of course not marry you.

(PS any chess computer would beat you these days. Not a reflection on you - just the awesome number crunching power they possess. Again, not a sign of intelligence.)

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By Duggimon
28th Sep 2023 09:45

I think it looks very useful, especially compared with ChatGPT which I have found to be broadly awful at answering anything in any meaningful way.

Specifically, the biggest benefit to Terrapin is that it cites it's sources so you can check it's not making something up, the biggest issue with LLMs I've used previously is that there's no distinction between properly sourced information and made up drivel.

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By paul.benny
28th Sep 2023 10:05

As Jason says, asking the right question is fundamental.

I'm sure a bot can be trained to give the right answer but the question may be wrong or incomplete.

I just asked it about transferring BTL property into a company. The response was fine as far as it went. Exit considerations weren't part of the question so weren't addressed. And there was nothing about the advisability of such a strategy.

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VAT
By Jason Croke
28th Sep 2023 10:56

Replying to Ivor...

HMRC call it disaggregation, never heard it called "fragmentation" before, therefore it uses the wrong language which could be confusing, so strike 1 for using the wrong word.

VTOGC5200 is specifically about a partially exempt company joining an existing taxable VAT group, not relevant in most situations as if you have a VAT group, disaggregation, sorry, fragmentation is not really an issue.....most people split a business to avoid VAT. So strike 2 for talking about VAT groups and partial exemption when nobody mentioned any of that in their question.

VATREG8150 basically is the definition of what a sole trader is, as opposed to a partnership or a company and also touches on joint ventures. Not sure what relevance there is in regard the Anna answer, not every joe public will appreciate that a sole trader is not the same as a company. Strike 3 for having no relevance to the question asked.

The guidance for disaggregation can be found here https://www.gov.uk/government/publications/statement-of-practice-4-1983/... which gives some good detail as to what you have to do to avoid HMRC knocking on your door.....the AI would have had success if it had used the right word (disaggregation), it might have then found this guidance!

It's a bit like lawyers who still call it "electing to waive exemption" which sounds like £400 an hour sort of stuff, when everyone else calls it "opting to tax" which makes more sense.

Not trying to nit pick, these are useless answers even to an amateur. Can't even get the right legislation links right and none of it is coherent, sure, it sort of reads like advice, but it's just various bits of guidance cobbled together in a sentence form to make it sound like it's learned knowledge, but it's not, it's just repeating source material out of context.

Question. Did you come away feeling confident that you can split your trades or are you none the wiser? That is the point after all, to do away with paid for advice and get your answers on Google.

Where's the nuance? What if trade 1 is a coffee shop and trade 2 is a window cleaning business, perfectly okay to split, but what if we're looking at a chip shop and a kebab shop opposites sides of the same town or street? AI will get there eventually once it asks the right questions (plural, as in more than one question, which none of the AI's I've seen can do as yet).

Thanks (6)
Tornado
By Tornado
28th Sep 2023 11:58

The main fault, and probably the fault that will always make AI unreliable, is that basically all it does is a Google Search (and probably many other search engines as well) and then tries to provide an answer compiled from the most popular results.

Whichever way you look at it, AI is not intelligent and will never be able to provide any reliable opinion, and may struggle with factual answers as well. If it was programmed to provide a positive opinion, that opinion will always reflect the thoughts of the person that programmed it. We will all end up arguing with each other when our respective AI programs come up with myriad conflicting answers.

That is my opinion and I can appreciate that others will disagree with it, which of course, is why we are all better off as humans with real intelligence discussing our differences. If we all worshipped just one AI God, then this would be a dismal World fulfilling the prediction of the worst Sci-Fi scenarios.

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Replying to Tornado:
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By Tax Dragon
29th Sep 2023 10:02

Tornado wrote:

The main fault, and probably the fault that will always make AI unreliable, is that basically all it does is a Google Search (and probably many other search engines as well) and then tries to provide an answer compiled from the most popular results.

And what do most Awebbers do?

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Replying to Tax Dragon:
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By Wanderer
29th Sep 2023 13:12

Most just post on AWeb. Some actually read the legislation.

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Replying to Tornado:
By Duggimon
29th Sep 2023 15:31

Tornado wrote:

The main fault, and probably the fault that will always make AI unreliable, is that basically all it does is a Google Search (and probably many other search engines as well) and then tries to provide an answer compiled from the most popular results.

That might possibly be what this one is doing but is 100% a misrepresentation of how a large language model works and is absolutely not what is happening if you ask ChatGPT or Bard a question.

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Replying to Duggimon:
Tornado
By Tornado
29th Sep 2023 16:38

Perhaps the best way to answer this point is to ask one of these programs the question 'How does Artificial Intelligence Work?'

It seems to me that it should be able to explain how it works better than we can.

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Replying to Tornado:
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By Tax Dragon
29th Sep 2023 17:00

I have no idea how my mind works. (And I mean my mind, not my brain.) I wish it wouldn't do a lot of the things it does.

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VAT
By Jason Croke
28th Sep 2023 12:04

I've asked Anna about the marginal tax rate (it's a popular discussion on Twitter, that those earning between £100k and £125,140 are effectively taxed at 60%).

It correctly explained about this nuance whereby you pay more tax in this band than those earning from £125k upto £150k.

I then asked a second question on how to avoid this band and it explained the difference between avoidance and legitimate tax planning and then suggested things like salary sacrifice, put more into a pension fund, etc.

I think the more basic enquiries can be dealt with by AI, but basing your entire personal or corporate tax liabilities on it? The AI promotors market their products as intelligence, factual, robust, but they don't talk about its limitations and boundaries, once we know its limits we can perhaps enjoy the benefits of what it has to offer and also know when it it can't go the extra mile (ie, it'll give you a steer but lets not ever say its giving advice).

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Replying to Jason Croke:
Tornado
By Tornado
28th Sep 2023 13:15

The AI promotors market their products as intelligence, factual, robust

Intelligence : It is intelligence Jim, but not as we know it
Factual : Based on internet information
Robust : Does not crash that often

Seriously, I think this type of marketing is at the limit of credibility and was almost certainly created by AI programmed to promote itself.

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Replying to Jason Croke:
By Duggimon
29th Sep 2023 15:32

I think this is the kind of thing it could be very useful for, answering questions you already know the answer to but don't want to spend ten minutes typing up in an email. Ask the AI, get the answer, sense check it and fire off to the client.

Trusting it to help you forge a path in to the unknown is asking for trouble.

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By Truthsayer
28th Sep 2023 13:30

I have just asked it 'What is the taxable benefit if a company provides free petrol to an employee for use in a personally owned car?' It wrongly responded that the fuel scale charge should be used, which is only for company cars.

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Replying to Truthsayer:
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By Bobbo
29th Sep 2023 09:55

I just asked it your question again, exactly as it appears in your comment, and it answered about fuel benefit. No mention of fuel scale charges (in fact it specifically said its comments covered only IT and NIC and not VAT).

Is it... learning?

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Tornado
By Tornado
28th Sep 2023 14:21

What is it about human brains that AI finds so difficult to replicate?

Human emotions will be up there somewhere with senses of responsibility, coherent communication (not saying the same thing two or more times in different ways), commitment, seeing the other persons point of view, compromise, learning from mistakes, etc.

What is the point of AI anyway? (I wonder if AI can answer that one in a rational way).

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Replying to Tornado:
VAT
By Jason Croke
28th Sep 2023 17:08

Tornado wrote:

What is it about human brains that AI finds so difficult to replicate?

Human emotions will be up there somewhere with senses of responsibility, coherent communication (not saying the same thing two or more times in different ways), commitment, seeing the other persons point of view, compromise, learning from mistakes, etc.

What is the point of AI anyway? (I wonder if AI can answer that one in a rational way).


Indeed. Emotion and experience and "local knowledge" aren't something you can Google.

There are many little short cuts or top tips, which we see here in Any Answers, that get the job done based on experience. Sure you can write to HMRC about striking off your company. I often see queries here about striking off a company and the common answer is to just do nothing, but the guidance says file a DS01 and that is the answer AI will give you.

And what if you have an overdrawn DLA? Do you still do nothing or file that DS01 or do you have to do something else. Three separate questions, three separate answers, but when combined, THAT is the moment human brains come into their own.

ps. I'm not an Accountant and so know little about the nuances about striking off procedures, so go easy if I've said anything wrong that an AI would (ironically) would probably have got right :)

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Replying to Tornado:
By Duggimon
29th Sep 2023 15:49

The human brain is incomprehensibly more complex than a computer. It's more complex than all the computers joined together. There is no way we could build a computer that could do all the things the brain does, and everything the brain does effects everything else the brain does which only adds more complexity.

A large language model is a trained probabilistic model designed to replicate patterns in writing to mimic humans. That is it's only goal. It's not intelligent and the appearance of intelligence from it is a trick we play on ourselves through interpretation, but an easy trick to play because they've really gotten quite good at doing what they do, which is a very limited subsection of human writing.

There is no scope to adapt it into doing other human things though, there's no thinking, there is nothing to think, it's not achieved by having a program written like a brain sitting there deciding what to say, it's input -> model -> output.

The input returned in response to the output becomes training material so with millions of users talking to it the model learns and grows, but there is never a thought process, just a more complex model that grows all the time.

The closest thing to a thought process on the 'AI' side is the scrubbing of data used to train the model, this is what went wrong in so many earlier chatbots like Microsoft's and Facebook's which were unleashed and within a day turned into insane racist misogynists because all the data went back in to train it. The scrubbing of data is done by the developers though, automated to some extent I'm sure but there's no evaluative process by the model itself, it's a dumb machine for taking input and spitting out output.

Other forms of AI exist but none are intelligent in the sense that they are self driven and decision making as it pertains to their own growth and development, and as for matching humans for intelligence, there's just not the power to do it.

The point of it however is that when you narrow the scope down to something like "a machine that can respond to us as if it were another human typing back" then it can get so close to success that it can be useful in certain situations. It's not intelligence though, it's still just a tool, but the definition of a tool is something with a use and these certainly have their use, it just tends not to be all the various things people try to bend it to do. A hammer is a terrible way to open a window, even if it sort of works, but that doesn't mean hammers are useless.

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By bernard michael
29th Sep 2023 09:19

Ye gods!!!!!
That means that MDTP will possibly have access to correct information
Or maybe worse
Clients will have more esoteric questions

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By Tax Dragon
29th Sep 2023 10:03

If it was intelligent it would of course ask for opinions in here.

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