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For AI users in highly regulated sectors like finance and accounting ‘trusting something partially is not adequate’ with high levels of double checking and worries about lack of audit trail

The trust ceiling for artificial intelligence (AI) is still a challenge with high risks for regulated sectors like finance and accounting, where ‘trusting something partially is not adequate’, warn experts at UnlikelyAI. These untrustworthy results can lead to heightened risk of potential governance failures, bad decision making and a lack of accountability.

Nearly two thirds of senior finance and accounting leaders do not trust AI generated results completely, highlighting concerns from users in regulated industries like accounting and finance where compliance with regulatory environment means inadequate, inaccurate responses can be high risk.

Despite widespread adoption, AI’s promise to make tasks quicker and better is failing to materialise due to employee time spent checking, verifying or redoing AI-generated work.

These are the findings of The AI Trust Report, major cross-industry research by consultancy UnlikelyAI, which identified a significant gap between stated confidence in workplace AI and actual behaviour.

Launching the research at an exclusive event in London, William Tunstall-Pedoe, CEO and founder of UnlikelyAI, said: ‘If systems are not trustworthy and make the wrong decisions there is a huge economic impact – 57% do not trust them completely, and in regulated industries, trusting something partially is not adequate. If you don’t trust it completely, you cannot use it.’

Trust levels are relatively low, with the finance sector only trusting AI systems 43% of the time, and Tunstall-Pedoe warned of ‘high friction with constant checking and uncertainty about outputs’. The level of compliance friction was highest in the finance sector at 70%, compared with only 54% in the public sector, while security concerns and lack of explainability, for example for an audit trail, were also major concerns.

‘Trust is still only partial and companies are facing astronomic costs, but 30% said they would increase their AI budgets if they could trust it,’ he added.

‘Humans have an error rate, but hallucination, that is not a human error. There is a higher bar for automated systems and I think that higher bar is legitimate. There are intrinsic limitations of the technology, even after many years it is still a problem.’

An expert in the AI field, Tunstall-Pedoe warned there are ‘four negative effects of dependence on AI – AI blindess, dependency, burnout and analysis paralysis’.

A lack of trust in the results produced by the AI tools is shaping usage with many hours a week being spent on AI verification with low levels of confidence in the outcome of AI driven results. The research found employees are spending on average two hours and 41 minutes using AI each week, but nearly as long checking or redoing the results at two hours and 30 minutes.

A third of respondents said they experienced ‘AI burnout’ from repeatedly verifying outputs, while 31% experienced ‘analysis paralysis’, unsure whether to trust the AI result or their own judgment.

Almost all respondents (99%) spend at least some time checking AI outputs each week – citing everything from quick sense checks (minor verifying, 18%) to redoing some or all of the task manually in order to verify it (20%) or even ignoring the output entirely (18%).

So far, AI is not making work better, either, according to the research. Just 57% of respondents reported any kind of return on investment (ROI) on their organisation’s current AI investments, while 13% are yet to see a clear positive ROI and do not think they will, and some even say ‘it has been actively bad for [their] organisation so far’. 

Tunstall-Pedoe added: ‘These findings highlight a critical challenge: there has to be a better way to use AI. Large language models (LLMs) have strengths in specific, limited areas, but there’s a huge lack of understanding about when to use them and when to look to other, less-fallible models. That’s where this trust gap is coming from.’

Best models score only 39% on complex, real world finance questions written by experienced  professionals, according to data from PRBench Finance, validating why finance leaders are so wary about the outcomes,

Another issue for businesses is unauthorised use of AI by employees, relying on off-the-shelf systems, rather than advanced LLMs, for example, but these too have to be used with adequate guardrails in place.

‘It is important to set ground rules within teams for when AI is and isn’t appropriate,’ he added. ‘Most people don’t realise that not all AI is built the same. LLMs are great for creativity and summarisation, but they are weak at accuracy and explainability. Training staff on the strengths and weaknesses of different systems builds confidence and prevents misuse.’

The panel discussion also focused on accountability, raising important governance and compliance issues in regulated sectors, where security concerns are a priority, especially when handling confidential client data and financial information, and critically, the question of who has accountability if AI goes wrong.

This raises the serious question about how an accurate, reliable audit trail can be produced when the data is AI generated, an area which is a major focus for the future speed of rollout and trust.

When asked whether now was the right time to ramp up AI investment if only 41% trust the output, Tunstall-Pedoe said: ‘There is a simple trade off, what is your appetite for spending money, what is your appetite for risk? Some of the mistakes being made now are less defensible now, but I think that will change quickly.’

Sara White,

Editor, Business & Accountancy Daily

With nearly 50,000 Brits estimated to have upped sticks and returned to the UK due to the war in the Middle East, complex statutory residence test (SRT) rules, benefits in kind and critical day counts could trigger high tax bills

For returning UK nationals, their tax liability raises immediate concerns, with warnings to check their position on tax residence, particularly as they may have left the Middle East quickly without considering tax implications when they took the decision to leave.

When the war between US/Israel and Iran broke out on 28 February, it clearly caught the several hundred thousand strong British community in the region off guard.

HMRC said it does recognise that ‘people may need to make decisions very quickly which is why there are longstanding rules in place in place’.

The key tax consideration for returnees is the UK statutory residence test (SRT) whereby individuals and businesses are liable to UK tax depending on the number of days they spend in the country over the course of a tax year from 6 April–5 April.

HMRC confirmed that ‘up to 60 days can be excluded from someone’s overall count of days spent in the UK in a tax year, if they are in the UK due to circumstances outside of their control, and meet the conditions for exceptional circumstances’.

This gives returnees some flexibility on the standard 183-day figure under the SRT, but it needs to be adhered to carefully.

An HMRC spokesperson told Business & Accountancy Daily: ‘The existing rules provide the right protection while following the basic principle that individuals living in the UK should pay tax in the UK. Exceptional circumstances, such as being affected by a war, are taken into account.’

HMRC stressed ‘exceptional circumstances do not provide a tax exemption and only affect how UK days are counted for tax residence purposes’.

Whether days spent in the UK can be disregarded due to exceptional circumstances always depends on the facts and circumstances of each individual case. HMRC guidance in RFIG22250 provides further details and an example where exceptional circumstances can apply. It also has an HMRC residence status checker to help establish your residence position.

The swift nature of the outbreak of the war means that many UK nationals who were working in the UAE, Kuwait and Saudi Arabia, and decided to come back to the UK quickly when the conflict broke out, have some serious tax issues to consider.

Robert Salter, a director at Blick Rothenberg, warned: ‘Being in the UK will increase the likelihood that in individual is classed as UK tax resident under the statutory residence test (SRT). 

‘Being tax resident means they will be liable to UK taxes, including a 24% tax on their worldwide income and gains, for the period of their UK tax residence. This could include their Middle East salaries.’

So clearly there are tax risks. Being back in the UK increases the likelihood that an individual is classed as UK tax resident under the statutory residence test.

The key number to consider is 183 – if the individual spends at least 183 days in the UK in the tax year then it is impossible to meet any of the automatic overseas tests. The timing of the start of the war means many entered the UK during the 2025-26 tax year, therefore overlapping two tax years.

There are also longer term tax considerations, Salter added. ‘If someone becomes UK tax resident again, even if only for one to two years, and they then return to the Gulf, their estate may be liable to 40% UK inheritance tax (IHT) if it is worth more than £325,000 on death.’

For those returnees who maybe only just moved to the Gulf for work, there are also potential tax risks related to employment income.

Salter explained: ‘Individuals who only moved to the Gulf region a few months ago who have yet to become “non-resident” in the UK, will find the benefits in kind (BiK) which they receive such as free housing or a company car are liable to UK tax.’

Just because individuals might remain non-resident in the UK in accordance with the SRT, they and their employers may not be off the hook for UK taxes.

‘While the rules do allow individuals to have “incidental” UK workdays back in the UK without being liable to UK tax, HMRC do not treat most UK workdays as being incidental,’ he added.

‘This means if someone who has fled the Middle East starts working from a UK home office but continues doing their core role as a “global tele-worker” rather than a traditional location, they would be liable to PAYE and other taxes on those UK workdays even if they do not become UK tax resident.’

Another factor to consider is that UK nationals living in the region for less than five tax years before returning to the UK and recommencing UK tax residence can be caught by the ‘temporary non-residence’ rules.

‘These rules mean that capital gains which materialised when initially non-resident in the UK, perhaps on the sale of a UK business or a significant shareholding, would “fall back” into UK taxation,’ warned Salter.

The statutory residence test is complicated and returnees need to take into account a number of ‘connecting factors’, which are not straightforward. It is always highly advisable to consult with specialist tax advisers and accountants to avoid any unwelcome tax bills or inquiries from HMRC.

For those returnees who have been working in the Gulf for at least 10 tax years, there may be some tax planning opportunities under the foreign income & gains (FIG) rules, which replaced the old non dom rules. Or, course they could look to move to an alternative low tax jurisdiction such as Italy, Portugal or Switzerland.

Under the FIG regime, individuals who have been living outside the UK for at least 10 tax years prior to their return would be able to benefit from these rules, Salter said.

For eligible individuals, this means that non-UK investment income and capital gains should be outside the scope of UK tax for the first four years back in the UK.

Dual tax residency

There are also some double tax treaties which could help those back in the country temporarily, such as the 2016 UAE-UK double taxation convention (DTC), although these are not always clear cut to the lay person, and professional advice should be sought.

Salter explained: ‘Individuals who remain resident in the overseas jurisdiction may become “dual tax resident” while back in the UK.

‘In such cases, where there is a double tax convention (DTC) between the UK and the overseas country concerned, the dual resident rules within the relevant convention may provide the possibility of avoiding UK taxes on foreign income and gains, if it can be argued that the overseas jurisdiction has the core taxing rights in that individual’s specific position.’

The Foreign Office is advising against all but essential travel to the Gulf region at the present time.

Clearly, the tax landscape is extremely complicated and affected individuals should always seek professional advice before taking any decisions about their tax position.

Writes Sara White,

Editor, Business & Accountancy Daily

With M&A still booming, the accountancy market is questioning whether this is as good as it gets.

“We were looking to sell in three to five years, but was the opportunity still going to be there? We decided that this is probably the peak of the market. If anything, it’s going to slow down…”

That was the view of a managing partner at a mid-tier firm I spoke to recently. They asked to remain anonymous because the deal is not yet public, but the sentiment remains. In the end, they rolled the dice, concluded valuations were unlikely to beat last year’s highs, and took the offer. They are far from alone in mulling over this decision.

Most managing partners have had that call from a private equity house. The ones I’ve spoken to certainly have — in some cases, it’s a weekly occurrence. And there are only so many times you can bat away an approach before you start to wonder whether this really is the peak.

So will those that took the plunge regret their decision as valuations continue to rise, or are things going to slow down from here?

How long will peak valuations last?

If you listen to James Gosling, the managing director at AJ Chambers, there is no time like the present to shake hands on a deal. “Valuations definitely peaked last year,” said Gosling, who noted that 2025 had the most transactions in the accountancy space for some years.

“It had been building, but last year was really the point where many of the dynamics driving the M&A activity were really emphasised,” he said.

To say practices have had their hands full would be putting it mildly. The pressures behind the decision to sell range from the lack of a succession plan and difficulties attracting and retaining talent to regulatory burdens and the growing challenge of keeping pace with technology – a problem that has only intensified for some with the sudden rise of artificial intelligence.

These challenges are as common in an accountancy office as Teams calls, naff self-help leadership books or bitter coffee. The only difference this time is the tidal wave of private equity investment sloshing onto accountancy’s shores. The first big player in the accountancy space, really, was Cogital-backed Baldwins (now known as Azets) almost a decade ago. Since then, the likes of Xeinadin, Sumer, Cooper Parry, Gravita and even Grant Thornton have deepened their pockets with PE-investment.

Gosling also attributed last year’s heightened activity to a sense of herd mentality. “A lot of people, maybe on the fence about whether they should sell or not, were seeing their competitors or people around them being bought or merging with another independent firm,” said Gosling. “The momentum had been building, and last year we saw people say, now’s the time to move.”

The question is how long that peak will sustain. Another managing partner I spoke to this week said the peak could last anywhere from one year to five years. Regardless, after a busy 2025, the momentum is expected to continue this year anyway.

“It’s going to be relatively high because there are a lot of ongoing conversations that have dragged from 2025 into 2026,” said Gosling.

The MTD elephant in the room

Private equity-backed investment may have attracted the most headlines as the shiny new toy in the market, with huge names merging and new players surging up the accounting league table, but a lot of movement this year is expected in the independent space – especially with firms under the £1m mark.

Much of that can be attributed to the starting pistol firing on the government’s long-gestated Making Tax Digital project. Sole practitioners have done a lot of soul searching since MTD was first announced. As the April start date for the first tranche of taxpayers draws closer, sole practitioners are looking to make MTD someone else’s problem. For independent firms, this creates an opportunity.

“This market is going to come alive this year,” said Gosling. “We’re going to see a lot of solid independent firms start acquiring sole practitioners and local firms that they’ve not had conversations with before.”

In fact, these conversations are already happening. At the start of last year, Mazuma was one of the most high-profile firms to see this as a massive growth opportunity. “Lots of these firms have had their exit denied to them… ” Lucy Cohen, the founder of Mazuma, told me last year, acknowledging that the £200k to £700k firms might not be massive but they have a “solid and sticky client base”.

Fresh off securing private equity investment from Nordic-based VIEW, Cottons is another mid-tier firm that is spearheading an M&A strategy built around acquiring small and sole practitioners.

“We are keen to grow, build, and find those smaller firms who we can really empathise with, who have the same type of clients that we work with, and we can help build and then retire when they want to,” Will Smart, the managing partner at Cottons, told me this week. Smart was keen to point out that he’s been a sole practitioner two times before. “I understand what keeps them up at night.”

You can see why valuations might be peaking for this cohort as finally MTD takes centre stage. As MTD lowers the income threshold to £20,000 from 2028, the window of opportunity to sell is now.

However, attention could be turning elsewhere. Naturally, this will impact the multiples.

Big year for large firms

The question in the year ahead is at which point will the lion’s share of private equity-backed firms move their focus and attention away from the smaller sub-£4m firms and start turning their attention to the other consolidators and larger players in the market? That’s the next battlefield.

“I have no doubt there will be a consolidator acquiring other consolidators in the market,” predicted Gosling. This moment will come to a head as some private equity firms reach the point of being flipped and start looking for either another private equity sponsor or a sale to another firm.”

Gosling is aware of a couple of conversations that are already happening on this front.

“Whether or not the deals would actually happen this year or not, that’s another matter, especially since we’re talking about large firms here,” he said. “It might take a little longer, but I certainly feel there might be one this year.”

We’ll have to wait and see. Perhaps they may go another cycle before being acquired by a consolidator. They may even roll the dice on the valuations seeing as big US private equity firms have landed on these shores and are engaged in active conversations with the consolidators. Let’s not forget, US-based Lee Equity announced a majority investment in Cooper Parry in December 2024.

Peak in valuations

In short, a lot is happening in M&A. But let’s talk about the numbers. Will this activity push the valuations any higher?

“I can’t see valuations for sub-£1m and up to £8m firms moving too much [higher],” said Gosling. “We’ve had the first couple of flips now and the multiples are up around the 14x to 15x mark for private equity.

“I think those [multiples] are going to stay around for the course of the year. It will be interesting to see when the focus from the private equity firms move further up the chain and if that will naturally mean the peak we’re seeing and the supply and demand at the smaller end of the market – the £1m – £6m firms as well as sub-£1m firms – will mean valuations will start to come down,” explained Gosling.

It’s eye opening seeing how high valuations have scaled. “It was only two to three years ago that a £2m – £3m firm was getting around 5x EBITDA mark – now firms are looking at multiples much higher than that,” said Gosling.

The shift in strategy for private equity firms and the focus on the higher echelons of the market will influence those multiples for the smaller end. “As a result, we may well start to see multiples reducing or settling down,” Gosling concluded.

Roll the dice or not

The figures speak for themselves. When presented with valuations like that, it’s no wonder firms like the anonymous partner decided to roll the dice.

Every senior leader I speak with keeps a close eye on the market. They’re aware of the numbers. An offer will come that’s irresistible to the partners and they’ll go with their gut.

But sometimes it isn’t the money that seals the deal. The model being offered can matter just as much, and no two are ever quite the same.

“A good number run a typical model, but there are always nuances,” said Gosling. “A structure could be 100% buyout, but you could have people who are selling but are remaining in the business for the mid to long term. They could roll their equity into group level, which is a standard buy and build structure that a lot of private equity houses have.

“Within that are other considerations, like how they engage with clients, how they engage with staffing and whether there are growth shares for the younger team that want to get into leadership or ownership.”

Alternatively, there is the shared equity model that the likes of TC Group and ETL offer.

Then there are the unknowns. US capital is still flowing in. My inbox is still filling up with deal announcements. And almost every firm I speak to has ambitious growth plans for the next three years, with some, like AAB, even talking about quadrupling in size by 2030 – and it can’t do that without an insatiable M&A strategy.

And who can really predict what happens next in the profession? As my colleague Tom Herbert discussed on our podcast this week, the last big M&A wave was driven by the emergence of cloud accounting when firms decided they could stitch together multiple offices, even global offices, around a cloud platform. This time, the new catalyst is artificial intelligence.

Particularly in the States, roll-ups are buying traditional firms in the hope that AI will paper over the cracks and make these sprawling businesses run more efficiently. And in the accounting world, we’re always one compliance shock away from more upheaval.

But with the need to buy out retiring partners, an M&A strategy and staying ahead of the curve with tech investments, some firms don’t have the luxury to wait and see. And with valuations as high as they are, firms are going to grasp the once-in-a-lifetime opportunity while it’s there.

Article appeared in AccountingWEB by Richard Hattersley

Financial advisory firm Interpath said on Monday that Bridgepoint Group plc has entered into exclusive negotiations to buy a majority stake in the business.

Terms were not disclosed, but according to reports, the deal values Interpath at about £800m.

Interpath said the potential transaction would mark “a successful exit for HIG Capital, which has supported the business since its carve-out from KPMG UK in 2021”.

Interpath employs more than 1,000 professionals globally across 12 countries including the UK, Ireland, France, Germany, Spain, the Caribbean and Hong Kong.

The financial advisory said that with Bridgepoint’s support, it will focus on accelerating its international expansion, “continuing to attract and retain top talent, broadening its service offering across existing and new geographies, and selectively pursuing strategic acquisitions to further strengthen its platform”.

Chief executive Mark Raddan said: “Today marks an exciting new chapter for Interpath as we embark on a new partnership with Bridgepoint. Not only does the team believe in our ambition, but they also share the values and culture that define who we are.

“Their investment will empower us to continue attracting exceptional talent and accelerate our expansion into new geographies across Europe, the Americas, and Asia. We are confident that with their support, we can build on our achievements, create even greater opportunities for our people, and deliver enhanced value to our clients.”

Charles Welham, partner and sector head for business & financial services at Bridgepoint, said: “Interpath is a high-quality, differentiated advisory platform with a unique culture, operating in a growing market with significant opportunity for further share gains.

“What excites us most is the opportunity to support its exceptional base of talent and, by enhancing its distinctive people proposition, accelerate the pace at which more leading professionals in their fields join the Interpath platform.

“We are thrilled to partner with Interpath’s outstanding leadership team as they enter their next phase of growth – building a more international and diversified business, and continuing to win share from more constrained and conflicted competitors.”

Article from Accountancy Age