What is ChatGPT, and can you use it for business accounts and tax?

ChatGPT can answer questions in seconds. That’s a major part of its appeal.

Ask it about VAT registration, allowable expenses, Corporation Tax, payroll, Making Tax Digital or whether you should pay yourself through salary or dividends, and it will usually give you a clear answer.

That can be useful – and it can also be risky.

Your accounts and tax affairs depend on your actual circumstances. So, when you have questions, the right answers may depend on your business structure, income, turnover, contracts, VAT registration status, payroll arrangements, property income, previous claims, cash flow and future plans.

ChatGPT can help you understand a question. But it’s a bad idea to use it as your accountant.

What is ChatGPT?

ChatGPT is a generative artificial intelligence tool. In simple terms, you type in a question or instruction, and it generates a written response.

It can explain ideas, summarise information, draft text and help you think through a problem. For business owners, this can be a useful starting point, especially if you don’t fully understand accounting or tax language.

For example, you might ask it to explain:

• ‘What is a director’s loan account?’
• ‘How does VAT registration work?’
• ‘What does Making Tax Digital mean?’
• ‘What is the difference between salary and dividends?’
• ‘Which records I need to keep for my business?’
• ‘What questions should I ask my accountant before our year-end meeting

Used carefully, it can help you feel more prepared. It can, though, become a problem when a general explanation starts to look like advice.

Why ChatGPT is not a substitute for an accountant

Tax and accounting are full of rules, exceptions and thresholds. They also change over time.

ChatGPT is unlikely to know enough about your business to be safe. It may not know whether you trade through a limited company or as a sole trader. It may not know whether your turnover is taxable or exempt for VAT. It may not know whether you have employees, directors, shareholders, rental income, overseas income, capital gains and so on.

It may also miss the practical consequences of a decision.

For example, a question such as “Can I claim this expense?” could land you in trouble with the taxman. An expense might be allowable in one situation but not another. It might be partly allowable. It might create a benefit-in-kind issue. It might need different treatment for tax and accounting purposes.

The same applies to questions such as:

• ‘Should I buy a car through my company?’
• ‘Should I put my rental property into a limited company?’
• ‘Can I claim tax relief on this cost?’

I would be loath to make decisions based on what ChatGPT told me.

Why tax questions are different

Most business owners understand that ChatGPT can be wrong.

The more important point is that a tax answer can be wrong even when the general explanation is broadly right.

That is because tax depends on facts. It can depend on dates, thresholds, business structure, the type of income involved, what has happened before and what you plan to do next.

VAT registration is a good example. The threshold applies to taxable turnover, not simply total income. A business may also need to think about timing, exempt supplies, customers, pricing and cash flow.

Making Tax Digital is another good example. The rules are being phased in for sole traders and landlords, with different start dates depending on qualifying income.

If you may be affected, the question is not just “What does MTD mean?” You need to know when it starts applying to you, what records you need to keep, how often you need to report and whether your software is compatible.

Those are not questions a general AI answer can safely settle on its own.

Where ChatGPT can be useful

There are plenty of sensible ways to use ChatGPT before speaking to your accountant.

It can help you turn a vague worry into a clearer question or prepare for a meeting. It can also explain accounting terms in plain English and produce a checklist of information you may need to gather.

For example, instead of asking:

‘Can I claim this expense?’

You could ask:

‘What information would an accountant need to know before deciding whether a business expense is allowable for tax?’

That is a much safer use of the tool. You are not asking ChatGPT to decide. You are asking it to help you prepare.

The same approach works with other business finance questions.

For example, instead of asking:

‘Can I put this cost through the business?’

Try:

‘What details would affect whether this cost is allowable, partly allowable or not allowable for tax?’

This is where ChatGPT can be genuinely useful. It can help you organise your thinking and prepare the right questions before taking expert advice.

Where ChatGPT can be risky

ChatGPT becomes riskiest when you use it to make decisions that affect tax, cash flow, compliance or HMRC reporting.

It is also risky if you copy and paste sensitive information into an AI tool without understanding how that information may be used or stored. Business accounts, payroll information, customer details, employee data and tax documents can contain confidential or personal information. They should be handled carefully.

You should also be cautious about asking ChatGPT to interpret documents such as contracts, leases, shareholder agreements, loan agreements or HMRC letters. It may produce a plausible summary, but that does not mean it has understood the full legal or tax position.

When should you speak to an accountant?

You should speak to an accountant before relying on ChatGPT for anything that could affect your:

• Tax bill
• VAT position
• Payroll responsibilities
• Company accounts
• Self-assessment return
• Director’s loan account
• Property income
• Cash flow
• Business structure
• Dealings with HMRC

You should also get advice if the answer depends on a threshold, deadline, election, relief, exemption or change in business structure.

That does not mean you should never use AI. It can help you get started – but always talk to your accountant before deciding what is right for your business.

Need a real answer for your business, not just an AI answer?

ChatGPT (and other AI agents) can help you understand accounting and tax questions, but it cannot check your figures, business structure or wider plans.

If you are unsure about something affecting your accounts, tax, VAT, payroll or company finances, THP can help you get a clear answer based on your actual circumstances. Get in touch today to learn more.