02nd April 2024
Written by Qdos Contractor
A Qdos Freedom of Information (FOI) request to HMRC has revealed that around 2000 of the UK’s largest businesses are subject to Business Risk Reviews (BRR+) – meaning they are likely to have their off-payroll compliance scrutinised as part of these checks.
These reviews offer HMRC a comprehensive view of a big business’s tax affairs. Focusing on the likes of Corporation Tax, VAT and, in recent times, the off-payroll legislation, HMRC carries out these checks to gauge how tax-compliant businesses are.
But why does it matter that so many businesses are subject to these reviews? And how important is it that yours can be confident in its compliance before your next check?
Read on for a deep dive into the relationship between Business Risk Reviews and the off-payroll rules…
What is a Business Risk Review?
Business Risk Reviews (BRR+) are one of many compliance tools available to HMRC. Introduced in 2019, they demonstrated that the tax office was serious about helping businesses manage tax compliance.
Essentially, the BRR+ allows HMRC to work with businesses to understand how the business manages tax compliance. The review focuses on a few key areas: “Systems and Processes, Internal Governance, and… Approach to Tax Compliance”.
While HMRC will help businesses identify risk areas in their tax compliance, the BRR+ is also an opportunity to identify any tax liabilities that might be due as a result of non-compliance.
In other words, a BRR+ can give HMRC grounds to launch an investigation.
What does the BRR+ involve?
The Business Risk Review is a stringent process and begins with HMRC assessing the sector-specific compliance risks that each business might face. This involves looking at how different areas of the business interact with these sectoral risks.
For instance, how does a business’s systems and processes, internal governance and approach to tax impact the compliance risks it faces? Does it increase or decrease? From here, HMRC will assign the business with an overall risk rating and put forward a plan to reduce those risks.
It goes without saying that businesses are aiming for a low rating, which signifies lower risk, while higher scores indicate greater risk. HMRC is typically satisfied that low scorers are taking appropriate measures to ensure tax compliance.
Importantly, the risk score also determines the frequency of future reassessments. According to
HMRC’s internal manual, “the BRR+ will take place at least annually for customers who are not Low Risk. For Low Risk customers, a BRR+ will, in general, be carried out on a three-year cycle”.
Where do the off-payroll rules come into play?
It’s no secret that in recent years HMRC has been under pressure to raise tax revenue.
This extends to off-payroll compliance, which HMRC regards as a lucrative revenue source. The bigger the business, the more contractors they are likely to engage; therefore, the bigger the business, the bigger the potential liability.
Needless to say, large businesses engaging contractors should be regularly auditing and reviewing compliance processes to mitigate risk in this area.
Which businesses are subject to the BRR+ review?
Businesses that meet the following criteria are subject to Business Risk Reviews:
- Those with an annual turnover of more than £200 million
- Those with an annual turnover below £200 million, with complex tax affairs
- Those operating within a complex business sector
A final thought
While HMRC’s criteria limits the number of firms exposed to the BRR+, it still affects around 2000 businesses.
These firms are subject to a “resource-intensive” compliance approach by the Large Business Directorate – a dedicated function within HMRC.
This
department actively considers “the tax affairs of around half of the UK’s largest businesses at any one time”.
With off-payroll compliance included within a BRR+, these checks can present a risk. While these reviews aim to help businesses get their tax right, it is yet another reason to prioritise your compliance.
From in-depth audits to expert IR35 assessments, we provide a wide range of off-payroll compliance support to almost 3000 businesses via the award-winning Qdos Status Review facility.
