The Business Risk Review (BRR+) – Are you ready?

The BRR+ is the process used by HMRC to review the risk level of a business from a tax perspective and was introduced in 2019 to help influence taxpayer behaviour and ensure risk profiles are reflected accurately, which in turn governs the level of review from HMRC.

The results of the BRR+ inform HMRC’s Customer Compliance Manager (CCM) of the overall approach they should take to a particular business and the focus of any future risk assessment activity by allocating an overall risk rating and providing suggested areas of improvement.

HMRC reviews the business in respect of three areas: ‘Systems and Delivery’, ‘Internal Governance’ and ‘Approach to Tax Compliance’ and the BRR+ process will generally follow these steps:

1. Be prepared – HMRC can ask any number of questions in relation to the tax affairs of your business. We have seen the questions range from specific share scheme conditions through to reviewing the business’ VAT software and accounting system. We would recommend your business is ready with appropriate documentation should HMRC request it
2. Documentary evidence – where a business is focused on good tax governance, that it can evidence by way of strong controls and processes this is well received by HMRC. In addition, ensure your business is fully compliant with regimes such as the Corporate Criminal Offence (CCO) and Senior Accounting Officer (SAO). Process documentation, tax policies and a tax risk register are some examples of the types of documents we frequently see HMRC requesting as part of their risk review
3. Open communication – The BRR+ process is designed to be an open and collaborative discussion with HMRC to enable them to get to know your business, identify key risks and encourage change in behaviour and attitude towards tax compliance– be ready to share how the business works, recent changes and details of the finance and tax team to help HMRC understand where the risks lie and how these are mitigated
4. Review and monitor – After the first BRR+ review, your business should continue to monitor its tax risk (particularly where there are changes to the business) and ensure the tax risk register is updated to reflect any changes. Other follow up areas can include actioning any improvements and recommendations that HMRC have made in their final report ahead of the next review

There are four risk ratings available: Low, Moderate, Moderate-High and High.

As part of the process, HMRC review and define what the low-risk indicators are for each of the three areas (systems and delivery, internal governance, and approach to tax compliance) in each area of tax and will assess the business based on these indicators. 
Most businesses look to generally aim to be classified as Low-risk. This will naturally translate to less intervention from HMRC and less regular HMRC reviews (generally carried out on a 3–5 year cycle).

However, some businesses decide that a Moderate risk rating is more in line with their business, given their complexity, and believe this gives them better communication with HMRC when they need it, and gets them more traction with the rest of the business in respect of tax. 
Overall, it is ultimately dependent on the business and we can work with you to manage the risk and the process accordingly.

Following the pandemic, we have seen a renewed focus on conducting the BRR+ with our clients and a large part of the process is HMRC’s questionnaire and information request. We have seen HMRC focus on: 

• Systems - how the business uses technology to report tax accurately and reviewing the various controls built into those systems
• Governance procedures - compliance with CCO and SAO, as well as how the business reviews and monitors its tax risk
• Transfer pricing – compliance with local and master file requirements and reviewing relevant process notes and calculations

The focus of HMRC’s review and questions can vary significantly and so we recommend being prepared for scrutiny in respect of all tax areas. This approach may differ from previous checks/enquiries where one area of taxation may have been reviewed in detail. 

A number of questions are likely to be posed by HMRC as part of their information request. However, we find CCMs are usually open and transparent in their communications and will provide businesses with reasonable timeframes to prepare and provide information. 

Approval code: NTEH70824118