The computer said ‘YES’ — so I went and did it myself

Real and illustrative stories about apparently simple financial decisions — and the details that are easy to miss.

• The trip
• What the AI did not ask
• What happened next
• Was the AI wrong?
• The dormant company
• The real lesson
• Six questions

The trip that was mostly a holiday

One of our clients was planning a seven-day trip abroad. While he was there, he intended to attend a one-day industry event and meet a potential supplier.

His wife would travel with him.

The rest of the week would be spent relaxing.

Before booking, he asked an AI assistant:

“Can my limited company pay for my flights and hotel if I attend a business event and meet a supplier during the trip?”

The answer appeared instantly:

So the client booked the flights and hotel through the company. He included his wife’s costs, recorded the entire trip as business travel and reclaimed all the VAT shown on the relevant UK invoices.

The answer sounded clear, confident and reassuring. There was only one problem: it answered a general question, not the client’s actual tax position.

What the AI did not ask

It did not establish:

• whether the business event was the main reason for the trip;
• how many days were genuinely devoted to business;
• whether the holiday would have taken place without the meeting;
• why the company was paying for his wife;
• which costs could be identified as wholly business-related;
• whether any private element should be repaid, reported as a benefit or charged to the director’s loan account; or
• whether the company was entitled to reclaim all the VAT.

Those details were not minor. They were the difference between a legitimate business expense and a private holiday partly paid for by the company.

What happened next?

During the year-end review, we examined the invoices and asked the questions the AI had not asked.

The itinerary showed one business event and one short meeting during a seven-day family trip. Most of the expenditure had a clear private purpose. The wife was not an employee of the company and had no business role on the trip.

We therefore could not simply leave the whole amount in travel expenses. The accounts and VAT records had to be corrected. The identifiable business costs were considered separately, while the private element had to be dealt with appropriately through the director’s records. Had the position remained uncorrected and later been challenged by HMRC, the client could also have faced additional tax, interest and possible penalties.

The client’s reaction was understandable:

“But I asked AI, and it said I could claim it.”

And that was true. The AI had said yes — but only after being given a short, carefully framed question. It did not know the complete facts, inspect the itinerary or understand the client’s wider circumstances.

Was the AI wrong?

Not entirely.

That is what makes this story important.

AI can explain general principles quickly. Genuine business travel can be paid for by a company, and clearly identifiable business costs may qualify for tax relief. However, expenditure normally needs to satisfy the relevant business-purpose rules, and mixed private and business costs require careful analysis. VAT recovery is also limited to the business element where an expense has personal use.

The problem was not that the computer produced nonsense. The problem was that a broadly correct statement was treated as advice on a specific transaction.

“It was only a dormant company”

Another client recently came to us with a different version of the same problem.

We already looked after his trading company. He intended to buy a buy-to-let property through a separate limited company, so he formed the new special-purpose vehicle himself.

Before deciding to manage it alone, he asked AI whether it could help him prepare the company’s accounts and submit them. The answer was reassuring: yes, it could help him do that.

That made the job sound straightforward. There seemed little reason to appoint an accountant for a company that might have only one property and very few transactions.

But the property purchase did not go ahead during the company’s first year. Because there was no rent, no mortgage and almost no activity, the company gradually slipped from his mind. The filing deadlines did not.

He told us:

By then, the company had incurred a £375 late-filing penalty from Companies House and a separate £100 penalty from HMRC — a total of £475 before any professional fee for preparing and submitting the outstanding accounts.

When we quoted our fee for the dormant company accounts, his response said everything:

“I wish I had asked you to look after it from the beginning. I would have avoided the £350 penalty.”

He had slightly understated the Companies House penalty, but his conclusion was right.

The company may not have purchased the property or received any rent, but it still existed. A limited company must file accounts with Companies House every year, even when it is dormant or has not traded. If HMRC has issued a notice requiring a Company Tax Return, that obligation must also be dealt with unless HMRC confirms otherwise.

The AI had not necessarily given him a false answer. It could explain the process, help organise information and provide instructions. But it would only help when he returned to ask the next question. It had not accepted responsibility for the company, added the filing dates to a monitored system, chased him for the information or checked that the required submissions had actually been made.

The costly part was not forming the company. That took only a few minutes. The costly part was having no one responsible for what came next: checking its status, monitoring the deadlines, preparing the correct filings and making sure both Companies House and HMRC requirements were handled.

Doing it himself, with AI available if he needed help, appeared to save an accountancy fee. In reality, the client paid £475 in penalties and still needed to pay us to complete the work he had not had time to learn how to do.

The real lesson

AI is an excellent assistant. It can help business owners research ideas, understand terminology and prepare questions for their advisers. Online company-formation and filing services can also make routine tasks look deceptively simple. We use technology ourselves and recognise the enormous value it can bring — we have written before about what AI can and cannot do in bookkeeping.

But technology does not accept responsibility for your tax return. It does not represent you during an HMRC enquiry. It does not automatically know the facts you forgot to mention, and it does not notice a missed deadline unless someone has made it responsible for monitoring one.

Six questions to ask before you act on an AI answer

Before relying on an AI answer, or deciding that a financial task is simple enough to manage alone, ask yourself:

• Did I provide every relevant fact, including the inconvenient ones?
• Is the answer based on current UK tax and company law?
• Does the rule apply to my precise circumstances?
• What connected obligations or filing deadlines could I be missing?
• Who is monitoring what needs to happen next?
• Who will be responsible if the answer is wrong or the deadline is missed?

If you are unsure which filings a company owes and when, our Companies House forms guide sets out the common ones, and the Business Hub collects the deadlines in one place.