HMRC’s Business Risk Review consultation - What does this mean for taxpayers?

02 November 2017

By Andy Olymbios, Tax Reporting & Strategy and Tax Dispute Partner 

HMRC has opened a consultation into the review of the current Business Risk Review (BRR) process. Currently Customer Relationship Managers (CRMs) conduct periodic BRRs of large business to assess their risk profile and award them either a ‘low risk’ or ‘non-low risk’ rating. The risk rating determines the level of scrutiny and resource received from HMRC. A number of different inherent and behavioural risk factors are considered when determining the risk profile. The current process was introduced 10 years ago and has not been updated since, so this consultation looks to review:Content considered within the BRR

  • The results of the BRR and whether these can be enhanced (e.g. with more risk categories) to provide greater clarity and drive more open discussion;
  • Positive incentives for being low risk and the reverse for being higher risk; and
  • The opportunities resulting from the outcome of the process

The BRR consultation highlights the concept of a tax control framework (TCF), which was first defined by the Organisation for Economic Co-operation and Development (OECD) forum on tax administration in 2016. This is something that was discussed in our 2016 Tax Function of the Future publication - Enhancing Tax Process Management and Controls - noting popular frameworks of internal control such as COSO which are used by taxpayers to enhance their TCF. If TCF were to become prominent in the BRR process it could be the thread that allows the alignment of a number of topics under the umbrella of cooperative compliance. These topics include UK tax strategy, Senior Accounting Officer (SAO), Banking Code of Practice, Know Your Customer (KYC) and the Corporate Criminal Offences (CCO).

Greater clarity on the interaction between these areas would be welcomed by most taxpayers and is essential as we move towards increased real time reporting across the OECD and an even stronger emphasis on “justified trust". TCFs have the ability to put taxpayers and HMRC in a position where there is greater clarity over the risk and compliance status of a group but there must be a benefit to both sides. Practically taxpayers will have to invest to ensure that tax governance is sufficiently formalised to enable internal or external testing and assurance to be provided over the end to end tax processes. In return, as the consultation discusses, it must be clearer what the incentives are for taxpayers to invest and be classified as low risk.

While there is extra work for taxpayers, many are already well on the way to more formalised governance due to the aforementioned UK initiatives. In our view, technology has an important role to play if taxpayers are to really see the benefits of investing in justified trust and achieve two way cooperative compliance. This is partly because technology has the ability to enable an accelerated commercial benefit of enhanced control efficiency and effectiveness. But it also gives hope that HMRC will be able to provide real time assurance over the compliance status of the group to reduce time spent on historic auditing creating costly uncertainty.

The consultation closes on 6 December and our experts will be hosting a live webcast on 20 November at 3pm with Jo Wakeman (Director of Large Business at HMRC) to discuss the impact of the consultation in more depth. Please click here to register for the webcast.  

For more insights on the BRR consultation, tax disputes and more you can follow me on Linkedin by clicking here

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