This part of GOV.UK is being rebuilt – find out what beta means

HMRC internal manual

Tax Compliance Risk Management

Executive summary

This guidance is for Large Business customer relationship managers and their customers. It explains HMRC’s approach to working with large business customers to manage their tax compliance risk. The key elements of this approach are:

  • to build and maintain effective relationships with all our customers promoting delivery of the right tax at the right time
  • to classify our customers as Low Risk or not Low Risk so that we can target our resources on those customers who represent the greatest risk; and
  • for those customers who are not Low Risk, to understand in what respects they are not Low Risk so that we can target our resources on these areas.


We decide a customer’s overall level of tax compliance risk by first considering the inherent risk they represent (in terms of, for example, their size, complexity and the amount of change they are subject to) and then looking at whether or not they effectively mitigate this risk through their behaviour (for example, their attitude to tax avoidance, their systems and processes and their openness with HMRC). This is done during the periodic Business Risk Review, which is a collaborative process between the customer and HMRC. With the right behaviour any customer, regardless of their size or complexity, can benefit from Low Risk status.

The following provides an overview of the Business Risk Review process.

Business Risk Review overview flowchart (Word 213KB)

Business Risk Review overview text version (Word 24KB)

We assess customers’ behaviour against three factors, each with a number of criteria which are set out below. If a customer meets all these criteria in all material respects we will classify them as Low Risk.

In order to be classified as Low Risk a large business customer will:


  • Be open with HMRC in real time about how it manages tax compliance risk across all relevant taxes and duties;
  • Raise significant compliance issues, uncertainties and/or irregularities with HMRC in real time;
  • Promptly provide full, accurate and helpful answers to HMRC queries;
  • Be aware of its obligations across all taxes and duties, seek assistance as necessary and provide appropriate resources to deal with those obligations;
  • Have clear accountabilities up to and including the Board for the management of tax compliance risk and tax planning.



  • Have a history of accurate and timely returns, declarations, claims and payments across all relevant taxes and duties;
  • Have appropriate tax accounting arrangements in place.


Tax Strategy

  • Not be involved in tax planning other than that which arises from genuine commercial activity;
  • Not structure transactions in a way which gives a tax result contrary to the intentions of Parliament;
  • Tell us about significant transactions involving innovative interpretation of tax law and fully disclose any legal uncertainty;
  • Ensure that the business is not involved with illicit trades.


If we identify a customer as Low Risk they can expect that, in general, HMRC will not initiate interventions with them. HMRC will trust in the customer to be open and transparent and to bring issues to us in real time. Customers will have more certainty over their tax position because we will generally trust their tax analysis. We will not normally carry out another Business Risk Review for three years and in the interim will not challenge their tax returns or declarations. However, we will maintain sufficient contact with them to ensure that our knowledge of their business is up-to-date. This will enable us to provide them with a good standard of service and to ensure that both parties are kept informed of emerging significant risks.

In cases where a customer seriously breaches any of the behaviours that HMRC expects low risk customers to display, we may decide to immediately withdraw that status and its benefits. We will however always try to work with the customer to re-establish trust and confidence in their behaviours subsequently.

In the case of customers who are not Low Risk, we will still aim to develop and maintain an open and transparent relationship with them and to work collaboratively with them in real time to reduce their level of tax compliance risk. Working in this way helps both sides manage their resources better and provides the customer with more certainty about their tax position. In general, customers who are not Low Risk can expect us to:

  • Carry out annual Business Risk Reviews;
  • Carry out regular analysis (Risk Assessment) of their tax returns to identify areas of potential risk (though we will target this based on our understanding of where risk may lie developed during the BRR); and
  • Carry out more regular interventions (Risk Working) to test the information we have been given.


The results of this Risk Assessment and Risk Working activity will be fed back into the Business Risk Review.

In cases where customers represent an ongoing and significant risk, we will assemble task forces of specialists to deal with the risk intensively and will engage at Board level to persuade that customer to change the behaviours that are generating those risks.