Is ANNA’s AI Tax Advisor – Tax Terrapin – more useful than HMRC’s chatbot?

17 May, 2024 · 6 min read

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HMRC has been hitting the news headlines recently for all the wrong reasons – namely unacceptably long waits for its customers calling the helpline to get answers to their tax questions.

At ANNA we’re rather proud of our AI-powered taxbot, affectionately called Tax Terrapin, and are sure it could help a lot of people with instant responses to their queries. In this article we’ll tell you a bit more about Terrapin and look at how it measures up to HMRC’s offerings…

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Record waiting times to speak to an HMRC advisor
HMRC’s decision to close its tax helpline caused panic
What makes people so anxious about taxes?
ANNA’s Terrapin tax bot can answer any of your tax questions
ANNA’s Tax Terrapin versus HMRC’s chatbot
The results

Record waiting times to speak to an HMRC advisor

HMRC customers spent a collective 7 million hours waiting to speak to the taxman over the course of the financial year, a new report from the National Audit Office (NAO) has revealed.

HMRC’s decision to close its tax helpline caused panic

HMRC’s strategy to cope with the long waits is to encourage customers to turn to its digital services first. But do people feel comfortable using them?

There was uproar back in March when HMRC announced it would be shutting its tax helpline between April and September, with tax payers directed to online services instead. So much so that the very next day they reversed the decision and kept the phone line open.
At the moment people don’t yet feel comfortable using HMRC’s digital services to get the answers they need.

What makes people so anxious about taxes?

Even before the recent surge in wait times, HMRC has long been criticised for how long people are stuck on its helpline, which is used by hundreds of thousands of taxpayers struggling to fill in their self-assessment forms or work out why they’ve been given another new tax code.

ANNA’s Terrapin tax bot can answer any of your tax questions

At ANNA we aim to take financial faff and worry off your shoulders. So we’ve created Terrapin – a free-to-use AI tax bot that will answer any question you may have about tax (even the silly ones you might be embarrassed to ask an actual accountant!). It gives practical answers in clear bullet points, with a conclusion that sums everything up, and provides links to the relevant section on HMRC’s website. It’s easy to use, costs nothing and is jargon-free.

ANNA’s Tax Terrapin versus HMRC’s chatbot

It got us thinking: if HMRC does close its helplines and send people to its online web assistant service instead, how would it fare against Terrapin in answering 3 common tax questions? Here, in a battle of the bots we ask both the same question to see which AI answers best. Note: with Terrapin, we simply asked it the questions. With HMRC we sometimes had to answer follow-up questions to get it to send us to the right articles.

Question 1: Can you tell me what expenses that are tax deductible for me as a business owner?

Terrapin says:

As a business owner, there are several expenses that you can claim as tax deductions. These expenses must be solely for business purposes and not for personal use. Here are some of the main categories of tax-deductible expenses:

Cost of Goods Sold: This includes the cost of raw materials or stock that you sell as part of your business operations.
Financial Costs: These include insurance, bank charges, interest on bank and business loans, hire purchase interest, leasing payments, and alternative finance payments.
Business Premises Costs: These include heating, lighting, business rates, rent for business premises, business and water rates, utility bills, property insurance, and security costs. You can also claim expenses for repairs and maintenance of business premises and equipment.
Advertising or Marketing Costs: These include website costs and other costs related to promoting your business.
Training Courses: You can claim expenses for training courses related to your business.
Vehicle and Travel Expenses: These include vehicle insurance, repairs and servicing, fuel, parking, hire charges, vehicle licence fees, breakdown cover, train, bus, air and taxi fares, hotel rooms, and meals on overnight business trips.
Staff Expenses: These include employee and staff salaries, bonuses, pensions, benefits, agency fees, subcontractors, employer’s National Insurance, and training courses related to your business.
Legal and Financial Costs: These include hiring of accountants, solicitors, surveyors, and architects for business reasons, and professional indemnity insurance premiums.
Clothing Expenses: You can claim for uniforms, protective clothing needed for your work, and costumes for actors or entertainers.

Please note that you cannot claim expenses if you use your £1,000 tax-free ‘trading allowance’. Also, there are certain expenses that you cannot claim for, such as non-business driving or travel costs, fines, travel between home and work, everyday clothing, carers or domestic help, and legal costs of buying property and machinery.

Conclusion

As a business owner, you can claim a variety of expenses as tax deductions. These include costs related to goods sold, financial costs, business premises costs, advertising or marketing costs, training courses, vehicle and travel expenses, staff expenses, legal and financial costs, and clothing expenses. However, there are certain restrictions and conditions that apply. Always ensure to consult with a tax professional or refer to the official government resources for accurate information.

Useful links:

1: https://gov.uk/expenses-if-youre-self-employed/print

HMRC’s digital assistant says:

Do you complete Self Assessment tax returns?

Yes
No

Find out about claiming expenses if:

Question 2: How much salary do I need to pay myself without paying any tax or National Insurance contributions but still be eligible for state pension?

Terrapin says:

To be eligible for the state pension and avoid paying any tax or National Insurance

contributions, you need to earn a salary that falls within the Lower Earnings Limit (LEL) for National Insurance. As of the current tax year, this limit is £123 per week, £536 per month, or £6,432 per year.

However, please note that these figures are subject to change each tax year. Therefore, it's advisable to check the current LEL for National Insurance each year to ensure you're still within the threshold.

Here's a breakdown of the key points:

State Pension Eligibility: To be eligible for the state pension, you need to have a certain number of qualifying years on your National Insurance record. A qualifying year is a year in which you've paid or been credited with National Insurance contributions.
Lower Earnings Limit (LEL): If you're an employee earning between £123 and £242 a week from one job, you usually do not pay National Insurance, but your contributions are treated as having been paid to protect your National Insurance record. This means you can still qualify for certain benefits and the State Pension.
Tax Threshold: In the UK, the personal allowance (the amount you can earn before you start paying income tax) is currently £12,570. If your income is below this threshold, you won't have to pay any income tax.

Please remember that tax laws can change and the amount of tax you owe depends on your individual circumstances. It's always a good idea to consult with a tax professional or use a service like ANNA, which can help you with tax calculations and filings.

Useful links:

1: https://gov.uk/state-pension/print
2: https://gov.uk/national-insurance/print
3: https://gov.uk/plan-retirement-income/print

HMRC’s digital assistant says:

Most people pay Class 2 and Class 4 National Insurance through Self Assessment.

Some self-employed people do not pay National Insurance through Self Assessment, but may want to pay voluntary contributions (opens in a new tab).

You make Class 2 National Insurance contributions if you’re self-employed to qualify for benefits. like the State Pension. However, there are circumstances where you do not pay Class 2 National Insurance contributions through Self Assessment.

Find out more about paying Class 2 National Insurance if you’re self-employed (opens in a new tab).

Question 3 : Should I get VAT registered even though I have not reached the VAT threshold limit?

Terrapin says:

Yes, you can voluntarily register for VAT even if your business has not reached the VAT threshold limit. This decision should be based on your individual business circumstances. Here are some factors to consider:

Potential for Business Growth: If you anticipate that your business will exceed the VAT threshold in the near future, it might be beneficial to register for VAT now. This can help you avoid the rush and potential penalties associated with late registration.
Dealing with VAT-Registered Businesses: If your clients or suppliers are VAT registered, they can claim back the VAT you charge. In this case, being VAT registered may not be a disadvantage and could enhance your business image.
Claiming VAT on Purchases: If you're VAT registered, you can reclaim the VAT on your business purchases. This could result in significant savings if your business makes a lot of VAT-eligible purchases.

However, there are also potential downsides to consider:

Increased Prices for Customers: If your customers are not VAT registered, they won't be able to reclaim the VAT, effectively making your products or services more expensive for them.
Additional Administrative Work: Being VAT registered means you'll need to submit regular VAT returns and keep detailed records of your invoices and expenses. This can increase your administrative workload.

Before making a decision, it's advisable to consult with a tax professional or use a service like ANNA, which can help you with VAT calculations and filings.

Useful links:

1: https://gov.uk/register-for-vat/print

HMRC’s digital assistant says:

I found the following information. Select a link below to find out more, or try rephrasing your question.

The results

In a sense, it’s not a fair fight. Terrapin is an AI taxbot that actually answers the questions asked, whereas HMRC’s chatbot generally just picks up on a keyword in the question and suggests various articles relating to that keyword. We see this clearly in Question 2, where rather than answering the VAT-related question, HMRC’s chatbot just lists a number of articles about VAT.

That’s not to say that HMRC’s chatbot is useless – it can bring up information that’s useful and relevant. But it’s certainly no match for Terrapin and it’s unlikely to effectively replace HMRC’s dedicated phone lines any time soon.