HMRC ramps up rating system for large company tax compliance

Starting this month, HMRC is introducing Business Risk Review, a new approach to assessing the level of tax compliance at the UK’s biggest companies, adopting a more graduated series of risk ratings which it says will encourage greater compliance

The Business Risk Review process applies to around 2,000 of the largest corporates, and rates companies based on their behaviour and strategy in relation to tax. It was subject to a consultation during autumn 2017 and a pilot with 65 companies in the autumn of 2018.

Now HMRC is rolling out Business Risk Review+ (BBR+), which has been enhanced in response to feedback.

Unlike the previous system, which simply assessed companies on a binary basis as either ‘low risk’ or ‘non-low risk’, the new process has a more nuanced approach.

HMRC’s rating system for large businesses will now use four ratings – low, moderate, moderate-high, and high. In addition, there will be assessments of customer behaviour across three distinct areas – systems and delivery; internal governance; and approach to tax compliance – to determine risk ratings.

There is guidance defining what low risk looks like for each of the three behaviours, while HMRC will give a rating for risk in each tax regime to be shared with the business being assessed.

HMRC says BRR+ will enable companies to understand how their risk rating has been arrived at and provide a clearer understanding of the actions and timeline required to reduce the level of risk.

The BRR+ will take place at least annually for companies who are not judged to be in the low risk category. For low risk businesses a BRR+ will, in general, be carried out on a three year cycle.

Jo Wakeman, director of large business at HMRC, said: ‘We subject large businesses operating in the UK to an exceptional level of scrutiny – actively investigating half of them at any one time.

‘Through this work and challenging contrived arrangements we brought in an additional £10bn from large businesses last year.

‘Business Risk Reviews support us in maintaining a shift in companies’ behaviour towards greater tax compliance. We believe the new rating system will clearly set out the actions large businesses need to take in order to reduce their risk ratings and improve their compliance.’

HMRC BRR+ information