Why You Should Think Twice Before Asking AI a Tax Question
Taxation » March 27, 2026
A briefing for family solicitors on the risks of AI-generated tax advice in financial remedy proceedings
AI tools are increasingly being used in professional services to get quick answers to technical questions. When it comes to tax on divorce, that can be a problem.
This briefing sets out clearly where AI falls short in this area — and why the consequences of getting it wrong can be significant for your clients and your firm.
THE CORE PROBLEM WITH AI AND TAX ADVICE
AI tools do not actually “apply” the law. They generate responses based on patterns in language, which means they can produce answers that sound authoritative and well-referenced, but are in fact incomplete, out of date, or simply wrong.
This is not a theoretical concern. In other areas of law, AI tools have been found to have cited cases that do not exist. In a financial remedy context, where a single incorrect assumption about tax liability can shift the apparent value of a settlement by hundreds of thousands of pounds, that kind of error is not a minor inconvenience.
This concern is not unique to us. In January 2026, the seven professional bodies that jointly govern professional conduct in tax, including CIOT, ICAEW, ATT and STEP, published formal guidance to their members on the risks of using AI in tax work. The guidance specifically addresses the need to mitigate bias, exercise due care, and recognise the limitations of AI tools. The fact that the profession felt it necessary to issue dedicated guidance is itself telling.
A REAL EXAMPLE: SHARE TRANSFERS ON DIVORCE
Here is the kind of error we see in practice. Suppose a client’s settlement involves the transfer of shares in a family trading company. A solicitor asks an AI tool: does this transfer trigger a capital gains tax charge?
The AI might correctly identify that transfers between spouses are normally treated as a “no gain/no loss” transaction under TCGA 1992, s.58 — meaning no CGT is triggered. So far, so good. But it may then add that this protection only lasts until the end of the tax year following separation. That was the rule before April 2023. It is no longer correct.
What the law actually says now
Since 6 April 2023, the rules changed significantly. Separated spouses now have until the earlier of (i) the end of the third full tax year after separation, or (ii) the date of the final divorce order, to transfer assets with no CGT consequences (TCGA 1992, s.58(1A)). In plain English: the window is now up to three years, not one.
Better still, if the transfer happens as part of a formal divorce agreement or under a court order, there is no time limit at all (TCGA 1992, s.225B(2)). The no gain/no loss protection applies regardless of when the transfer takes place.
An AI tool trained on pre-2023 material, or that has not correctly weighted the legislative change, may give your client a one-year window when they actually have three, or miss the court order route entirely. That could lead to entirely unnecessary CGT planning, or worse, an incorrect assessment of what the settlement is actually worth.
Additional planning opportunities that may be missed
Where transfers must occur outside the protected window, other options may still be available. A joint hold-over relief election could be considered, subject to the company meeting the trading test and both parties co-operating. The availability of Business Asset Disposal Relief (BADR) on any subsequent disposal should also be verified by detailed analysis of the company’s activities and the individual’s employment status and holding period. These are not straightforward assessments, and they are exactly the kind of analysis that AI tools are prone to oversimplify or miss entirely.
⚠ The practical risk
An AI tool may give you the right general framework but the wrong time limit, miss the court order exception entirely, or overlook the trading company analysis needed to assess relief eligibility. Any one of these errors could produce a settlement figure that is materially incorrect — and expose your firm to a professional liability claim.
TWO FURTHER RISKS WORTH KNOWING
Fabricated authorities
AI tools sometimes cite cases or HMRC guidance that does not exist, or misrepresent the outcome of real decisions. If AI-generated analysis is passed on to a client or used in negotiations without verification, and the authority turns out to be wrong or invented, the consequences for your firm could be serious.
Confirmation bias
AI responds to the way a question is framed. If you ask “why doesn’t this transfer attract CGT?” rather than “does this transfer attract CGT?”, the tool will tend to construct reasoning that supports the conclusion already embedded in the question. In contested proceedings, this is a particular risk — the analysis may look compelling but simply be reinforcing an assumption rather than testing it.
AI can be a useful starting point. But tax on divorce is fact-specific, often counter-intuitive, and frequently central to whether a settlement is fair. Where there is real money at stake, independent expert analysis is not a luxury — it is the only reliable way to ensure the numbers are right.
This note is a general awareness update for family practitioners and is not a tax advice. We would be happy to discuss case-specific assumptions where expert input is anticipated.
Sign up to be notified when we publish new articles: Juno Family Newsletter
Need expert tax support?
Find a full list of how Juno can support on our Services page. Alternatively, get in touch with our team at: family@junotax.co.uk
| About Us At JAMK Services Limited, trading as Juno Family, we have been a market leader in tax on divorce for almost a decade. We understand the myriad of factors which are involved in the divorce process. Tax is just one element which needs to be considered, however we believe it’s an important consideration to be factored into proceedings at an early stage. We aim to provide straightforward advice on a range of complex UK tax issues whether that be through expert instruction or single joint expert instruction. |