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HMRC internal manual

Tax Compliance Risk Management

The Business Risk Review (BRR): Business Risk Review Assessment indicators: Inherent risk factors

CRMs and customers should consider the scale of the customer’s inherent risk against the following definitions.

 

1. Complexity: What is the potential risk in the size, scope and depth of business or tax interests?

 

Major Risk features
  • The customer operates within a highly complex structure - many VAT accounting schemes, large numbers of associates, subsidiaries etc.
  • High degree of complex tax issues e.g. PAYE arrangements, partial exemption, financial transactions etc.
  • Very significant tax throughputs in a number of different tax regimes.
     
Significant Risk features
  • The customer operates within a highly complex structure
  • Numerous complex tax issues
  • Very high tax throughputs in one or more of the tax regimes.
     
Moderate Risk features
  • The customer operates within a complex structure
  • A number of complex tax issues
  • High tax throughputs in one or more tax regimes.
     
Low Risk features
  • The customer operates in a well defined and organised structure
  • Fewer complex tax issues arise
  • Large tax throughputs.
     

 

2. Boundary: What is the level of complexity of international structures, financing and connected party issues?

 

Major Risk features
  • Foreign owned business and lack of clarity around the global business interests
  • UK business with foreign owned entities within the business
  • Complex and diverse business structure with major connected party interests and activity
  • Many and complex transfer pricing transactions
  • Extensive involvement with tax havens
  • UK-based business using offshore entities.
     
Significant Risk features
  • Diverse business structure, with significant connected party activity (e.g. partnerships, joint ventures)
  • Multiple transfer pricing transactions
  • Regular involvement with tax havens.
     
Moderate Risk features
  • Foreign owned business with some clarity around the global business interests
  • Simple business structure with some connected party interests (e.g. partnerships, joint ventures)
  • Some offshore entities, associates and payrolls
  • Some less complex transfer pricing transactions
  • Some involvement with tax havens.
     
Low Risk features
  • UK-based business customer as are all entities, associates and payrolls
  • Simple business structure with no connected parties
  • No transfer pricing transactions
  • No involvement with tax havens.
     

 

3. Change: What is the degree and pace of change with tax implications affecting the business?

 

Major Risk features
  • Numerous acquisitions and disposals (including international), with significant tax implications
  • Significant and frequent product/service charge/turnover changes, affecting liability, agreements, approvals, partial exemption etc.
     
Significant Risk features
  • Regular acquisitions and disposals (including international), with significant tax implications
  • Frequent product/service change/turnover changes, affecting liability, agreements, approvals, partial exemption etc.
     
Moderate Risk features
  • Infrequent acquisitions and disposals, with some tax consequences
  • Frequent product/service changes, turnover changes, limited effect on liability, agreements, approvals
     
Low Risk features
  • Low level of business change affecting tax obligations
  • Infrequent product/service changes, turnover changes, with simple liability/tax consequences .