Business Risk Reviews: What companies need to know

A change in HMRC's approach, what can organisations expect from a Business Risk Review?

With HMRC ramping up its activity, the tax office has incorporated IR35 compliance into its Business Risk Reviews. Focusing on the off-payroll working rules in these reviews marks a change in approach and one that businesses should take note of.

Rather than launching an IR35 enquiry immediately, as part of a Business Risk Review, HMRC will look to ensure an organisation has the correct processes to ensure their tax compliance. 

Here, we explain what a Business Risk Review is, what you can expect from the process and how you can navigate them from an IR35 perspective.

 

What is a Business Risk Review?

Introduced in October 2019, ahead of the roll-out of IR35 reform in the private sector in 2021, the Business Risk Review (or BRR+) is a risk assessment process to understand how businesses manage their tax compliance. 

While they’ve been around for some time, HMRC is now using BRR+ to assess the systems in place to ensure IR35 compliance and identify areas for improvement.

A Business Risk Review gives some businesses the opportunity to iron out issues and, at the same time, offers HMRC the opportunity to identify problem areas and trends.

Split across three areas of focus – Systems and Delivery; Internal Governance; Approach to Tax Compliance – a Business Risk Review will be initiated by a Customer Compliance Manager (CCM) at HMRC.

However, in addition to helping you work through any issues, HMRC may identify outstanding tax liability there and then.

 

Is a Business Risk Review a tax enquiry?

No, a Business Risk Review isn’t the same as a tax enquiry. Instead, it’s an assessment to understand where there are tax compliance risks within a business.

HMRC brands it as a mutually beneficial arrangement, helping you to resolve any issues that either you or your HMRC Customer Compliance Manager identify, as well as helping them to maximise tax revenues.

As part of the process, however, the way your business manages IR35 and employment status is now also examined.

 

Do all businesses get approached? 

No, Business Risk Reviews are only available to certain businesses.

HMRC works directly with around 2000 of the largest companies in the UK. To qualify, the business must have an annual turnover of £200m or more. 

In some cases, the tax office also works with complex businesses or businesses in complex industries with lower annual turnover.

But in both scenarios, the business will be appointed a Customer Compliance Manager (CCM), their dedicated point of contact at HMRC.

 

What does this change in HMRC’s strategy mean?

Ultimately, IR35 compliance and overall employment status now form key parts of the Business Risk Review and both are high on HMRC’s agenda.

Business Risk Reviews are one way that HMRC is supporting businesses to manage IR35 – something promised upon the introduction of the off-payroll working rules.

However, they are a double-edged sword. Any information gathered during the course of the Business Risk Review may be used or referred to at a later enquiry or investigation into IR35 compliance. 

 

What should businesses do?

Whether you’re subject to Business Risk Reviews or not, any communications you receive from HMRC regarding IR35 need to be handled and acted on by someone who fully understands the situation. 

Approaching the second anniversary of the introduction of IR35 reform in the private sector, Qdos continues to support firms with compliance, including process reviews and change implementation.

Qdos offers award-winning commercial services to support over 2,800 businesses – from IR35 contract assessments to rigorous audits and comprehensive insurance policies. 

Having defended over 1,600 IR35 enquiries and carrying out more than 2,000 IR35 status determinations each month, Qdos is well placed to advise end-clients regarding their compliance obligations.