A landlord who tried to challenge a tax fine by unwittingly using fake rulings generated by an artificial intelligence (AI) system like ChatGPT has had her appeal dismissed.

Felicity Harber received a £3,265 penalty from HMRC for failing to notify her liability to capital gains tax after disposing of a property, Legal Futures reports.

She appealed on the basis that she had a reasonable excuse because of her mental health condition and/or because it was reasonable for her to be ignorant of the law.

A First Tier Tribunal heard that the nine summaries of FTT decisions she cited saw the appellant succeed in showing that a reasonable excuse existed, five on the basis of mental health and four on ignorance of the law.

But all but one of the nine cases related to penalties for late filing, not failures to notify a liability.

Hallucination

Judge Anne Redston (pictured) accepted that Harber had not known they were the product of ‘hallucination’, where generative AI delivers plausible but incorrect results.

When asked if she had used an AI system such as ChatGPT, Harber said it was “possible”, but the judge said she then “moved quickly on to say that she couldn’t see that it made any difference”, as there must have been other relevant FTT cases.

Judge Redston said citing invented judgments was not harmless.

“It causes the tribunal and HMRC to waste time and public money, and this reduces the resources available to progress the cases of other court users who are waiting for their appeals to be determined.”

The tribunal ruled that a reasonable person in her position would not have been prevented by her mental health condition from contacting HMRC and that her ignorance of the requirement to notify her liability was not objectively reasonable.

Picture credit: Shutterstock/RTimages