TCRM3360 - The Business Risk Review (BRR+): Business Risk Review (BRR+) Assessment indicators: Deciding whether a customer is Low Risk
A customer can be low, moderate, moderate-high or high risk.
A customer will be able to make various reflective statements depending upon the category that they fall within. For example, a low risk customer will be able to say, "I maintain an open and transparent relationship with HMRC and can be trusted to file returns accurately and on time", whereas a high risk customer might say, "I am regularly in dispute with HMRC over significant amounts of tax".
All risk statements and risk criteria will be considered collectively in the decision-making process by the CCM and supporting Tax Specialists; including Audit and any other relevant specialist. The HMRC case team will collectively consider which of the four risk categories a customer will sit within. Although not an exhaustive list, example statements for each risk rating are provided in 'Which customers might expect to fit in each risk-rating categories 1to 4'.
Which customers might expect to fit in each risk-rating
| Rating 1
(low) | Rating 1
(moderate) | Rating 1
(moderate-high) | Rating 1
(high) |
| All customers will be able to say the
following: I maintain an open and transparent relationship with HMRC. I have systems and processes which deliver timely and accurate returns, declarations, payments and claims. I have sufficiently skilled and experienced resources in my tax teams. I only require HMRC assistance on the most complex issues and clearances; I routinely review my tax systems and declarations and, if I identify any errors, I notify HMRC at the earliest opportunity and take appropriate steps to remedy the situation. I have a clear tax strategy which is applied in practice to try and ensure the right tax is paid at the right time. I provide a complete worldwide group structure, if requested to do so by HMRC. I am not involved in tax planning other than that which supports genuine commercial activity and fully disclose the facts to HMRC where there is any uncertainty or disagreement. I am not directly involved with illicit trades and am active in mitigating illicit trades within my supply chain. | Customers will be able to say one of the
following: I want to get to low-risk and am working towards getting there. There are some aspects of my systems, tax governance or my approach to tax compliance which need to be addressed, but once these are resolved, I would expect to become low risk. I am not particularly concerned about being low-risk and recognise that there are aspects of my systems, my tax governance or my approach to tax compliance which may well prevent me getting there. I am, however, keen to maintain a collaborative, open and transparent working relationship with HMRC and, other than the occasional tax dispute where HMRC and I might disagree about the appropriate tax treatment, I am striving to get all my taxes right. | Customers will be able to say one or more
of the following: I am sometimes non-cooperative in my approach to tax compliance and/or fail to engage openly and constructively with HMRC, which means I cannot always be relied on to get my taxes right. My systems and processes are not sufficiently robust that I can always be expected to get my taxes right and the amounts of tax potentially at risk are material and significant. I seldom engage in tax avoidance schemes or boundary pushing as a leader, but I regularly position myself as a follower to try and secure tax advantages. I am not directly involved in illicit trades but I am not averse to profiting from them and take little active interest in mitigating illicit trades within my supply chain. | Customers will be able to say one or more
of the following: I am in the High-Risk Corporates Programme. My non-cooperative approach to tax compliance and/or unwillingness to engage openly and constructively with HMRC means I cannot be relied on to get my taxes right and the amounts of tax potentially at risk are material and significant. My structures and/or systems and processes are so labyrinthine or weak that I cannot be expected to get my taxes right and the amounts of tax potentially at risk are material and significant. My tax strategy makes me an outlier in terms of my approach to tax compliance. I am persistent in using creative tax planning and/or tax avoidance schemes; I regularly push boundaries to try and secure tax advantages. I am directly involved in illicit trades. |
Classifying a business as low risk for the first time may possibly represent a significant turning point in HMRC’s compliance approach to a particular customer. As such, decisions by CCMs to classify a customer as low risk need to be consistent and supported by evidence that can withstand scrutiny (i.e. internal governance or external reviews) and has been countersigned by the BRR+ Countersigning Officer (see TCRM3430). We have therefore provided examples below of what low risk behaviour might look like in practice for the BRR+ indicators.
In order to be regarded as low risk, a customer must not fail any of the low risk criteria in any material aspect (although there is one exception to this for Systems and Delivery which is detailed below). The phrase ‘in any material respect’ is taken from Senior Accounting Officer legislation and recognises that in large groups absolute perfection is not attainable. There will be cases where a customer does not meet one or more of the criteria but the failure is unlikely to indicate any significant or ongoing risk. For example, a customer may have made a relatively small error in one regime however, the error is unlikely to re-occur because they have put in place controls to prevent it or it was entirely unforeseeable. The CCM may reasonably decide that, on balance, for that particular criterion, the customer can be regarded as meeting it. Deployment of HMRC and customer resource on non-material issues does not represent efficient working practices.
The risk criteria will be considered for each individual tax regime separately e.g. VAT and Corporation Tax. Each Tax Specialist will complete the appropriate section of the BRR+ template for their regime to record the findings from their risk assessment. This includes recommendation for risk status, based on a comparison of their findings against the indicators for risk. If an indicator is not relevant to a particular tax regime, it should be disregarded when considering the indicators of risk.
If there is insufficient information on a particular indicator, this cannot be used in isolation and without explanation, to mark a low risk indicator as not being met. Instead, the regime Tax Specialist and/or CCM will use their knowledge and experience of the customer to consider the risk arising from not knowing this information. For example, it could be systems and process concerns after a merger/acquisition or concerns due to the complexities of a transaction and the need to understand it better. Each BRR+ narrative will be bespoke and if the Tax Specialist and/or CCM determines that not knowing particular information is a risk, they must articulate this concern in the BRR+ narrative. This narrative must go on to explain what actions will be undertaken to address this, by whom and over what period.
It is the role of the CCM to collaborate with the Tax Specialists and discuss the individual ratings for each regime. The CCM will arrive at an overall risk rating for the customer through the application of their knowledge, skills and experience while considering the overall context of risk for the business