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HMRC response to Business Risk Review consultation

HMRC response to Business Risk Review consultation

HMRC have published their response to their consultation on the risk review process for large businesses.

Chris Davidson

Tax Director

KPMG in the UK


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HMRC manage the tax compliance of the largest businesses through the use of the Business Risk Review (BRR), conducted via Customer Compliance Managers (CCMs). Presently, the risk profiles of businesses are assessed and categorised as either ‘low risk’ or ‘non-low risk’, which then determines the approach HMRC will take to their compliance. This consultation sought opinions on whether this system could be improved, and the responses received have now been published, with HMRC identifying a number of potential improvements and next steps.

Most respondents to the consultation thought the existing BRR system worked well, but felt there could be improvements – their comments, and the Government’s responses, are summarised below:

  • The majority felt that the binary low risk/not low risk classifications are too narrow to reflect the full range of risk profiles across large businesses, and agreed with proposals to move to a system with three to five ratings. However, some felt that this would give greater potential for disagreements between HMRC and businesses over risk ratings.

The Government’s response commits to a wider range of risk ratings that distinguish more clearly between high and low risk behaviour, although does not currently state how many ratings there will be.

  • There should be clear advantages and disadvantages of being assessed in each risk category. Moving to a system with more risk classifications would enable low risk businesses to benefit from a ‘light touch’ approach, while also providing more of an incentive for businesses to improve their risk rating. It would also allow HMRC to focus their resources on the highest risk businesses – however, some businesses expressed concern that low risk businesses would lose out on contact with HMRC.

The Government acknowledges that, while there should be clear advantages and disadvantages of achieving a certain risk rating, all of HMRC’s customers must be on a level playing field. Further investigation in this area will therefore follow.

  • The BRR process should take into account other tax risk management work that large businesses are required to carry out – for example, respondents thought that there was a lot of overlap between Senior Accounting Officer (SAO) reporting and the delivery section of the BRR, and some felt that businesses’ risk ratings could be influenced by published tax strategies or other risk control frameworks, such as the Banking Code of Practice.

The Government has confirmed that the enhanced BRR system will take more account of existing tax risk management work required by large businesses, such as SAO and published tax strategies.

  • The majority of respondents felt that for a business to be low risk, it should be expected to fulfil the requirements of the OECD’s Tax Control Framework (TCF). However, they did not support the burden of further reporting requirements.

The response suggests that a low risk rating should only be provided to large businesses that adhere to the TCF or have similar controls in place.

  • The BRR process should be more interactive, to generate an ongoing dialogue between HMRC and taxpayers on risk reduction. It was also felt that there could be better application of the BRR process across HMRC, to ensure consistent treatment between businesses.

The enhanced BRR process should support continuous dialogue between the CCM and the taxpayer by providing both parties with a clear set of actions and timelines to be regularly updated and discussed.

  • The majority of respondents also thought that a BRR process that focused on specific risk regimes or areas would be beneficial, particularly in reducing the burden of a wider review. However, the Government has not addressed this point in its response.

HMRC will now conduct a pilot using an enhanced BRR, to run alongside existing BRRs in 2018. Assuming the pilot goes to plan, the enhanced BRR will be rolled out during 2019/20.

For further information please contact:

Pete Honeywell

Chris Davidson

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