Large Business Risk Review consultation - ICAEW response

HMRC undertook a review of its risk assessment approach to large business over a 12 week period from 13 September to 6 December 2017 Large Business Compliance – enhancing our risk assessment approach. ICAEW submitted its response ICAEW REP 132/17.

The purpose of the consultation was explained in the consultation document as follows:

“The Business Risk Review (BRR) is a core feature of how HMRC manages the tax compliance of the largest businesses. Customer Relationship Managers (CRMs) currently conduct a periodic BRR of each large business, assessing their risk profile and placing them into a binary ‘low risk’/‘non-low risk’ category. This assessment is a key determinant of the level of scrutiny and resource the business receives from HMRC. The process, while still effective, has undergone limited change since its introduction 10 years ago.

"We are seeking your views on how a refreshed BRR approach, potentially with more (e.g. 4-5) risk categories tailored to the tax risks encountered in the large business population, will support: i) HMRC maintaining a shift in large business compliance behaviours; and ii) Providing greater clarity and confidence for large businesses – for example, the BRR could place businesses into a low risk, low-moderate risk, high-moderate risk, high risk and significant risk category.”

In its response ICAEW set out some concerns about the current relationship between large business and the HMRC Large Business Directorate and at the beginning of its response explained its general concerns as follows:

“The UK has been at the forefront of the development of enhanced cooperation and now, more recently, cooperative compliance.

"The system works best when there is genuine cooperation between large business and HMRC and each side fulfils their appropriate obligations.

The determination of the risk posed by a particular large business is clearly an important consideration in determining the extent to which that particular large business is subject, or not, to more invasive investigation and audit to determine that the tax outcomes are appropriate.

"The general approach is set out in the HMRC Manual Large Businesses – Introduction

"Risk Review is an important element of the good working of this relationship but we would urge HMRC to look more broadly at the current working of this model which we believe is suffering some problems. Our members inform us that HMRC is often not able to give certainty to its business customers on complex tax issues and there is an inability to be forthright in reaching conclusions on particular issues. Cooperation requires both sides to fulfil their obligations. We have set out some concerns in response to question 13 below.”

The concerns which we set out in answering question 13 are:

“Where there is a significant transaction then HMRC should be more open about giving absolute certainty in answering requests for clearance. If the taxpayer is being open in its request then HMRC should not be reluctant in providing the required certainty.”