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HMRC internal manual

Tax Compliance Risk Management

The Business Risk Review (BRR): Business Risk Review indicators: General

The Business Risk Review involves assessing the customer against seven factors:

  • Complexity - The potential risk in the size, scope and depth of business or tax interests.
  • Boundary - The level of complexity of international structures, financing and connected party issues.
  • Change - The degree and pace of change with tax implications affecting the business.
  • Governance - The customer’s openness and co-operation with HMRC and the management accountabilities for managing tax risk.
  • Delivery - The customer’s ability to deliver the right tax through systems, processes and skills.
  • Tax Strategy - the customer’s involvement in tax planning which does not support genuine commercial activity.
  • Contribution - whether the amount of tax declared/claimed looks reasonable in the light of what we know about the customer and/or sector.

The first three factors (Complexity, Boundary and Change) are ‘inherent’ factors i.e. in themselves they create risks while the second three factors (Governance, Tax Strategy and Delivery) are the behaviours through which these inherent risks might be managed. A customer may have inherent factors that potentially create major tax compliance risk, but they can still be Low Risk if they effectively manage these inherent risks through their behaviours. This is not purely theoretical. There are already a number of highly complex Large Business customers who we have identified as Low Risk.

The ‘contribution’ factor is a reality check before agreeing the overall risk status. In other words, if all other indicators suggest a customer is Low Risk but the customer’s tax/duty contribution is lower than expected, we would want to know the reason for this before agreeing Low Risk status overall.

The Business Risk Review for banking customers should also consider how the bank complies with the Code of Practice on Taxation for Banks. A Business Risk Review template specifically for use with banking customers is available to facilitate this.