HMRC (Her Majesty's Revenue and Customs) may conduct Business Risk Reviews (BRR) as part of their efforts to enforce tax regulations. The Business Risk Review is a process where HMRC assesses the tax risk associated with a particular business or contractor.
One of Worksome’s global clients was recently asked to complete an HMRC Business Risk Review, here’s what happened from the point of view of Worksome’s VP of Compliance, Ray Walker.
In the interest of maintaining the privacy of our client, we have not used their name and have replaced it with [the company].
1. Describe the makeup of this organization.
[The company] is a fortune 500 holding company and global provider of marketing solutions, who’s companies specialize in advertising, digital marketing, communications planning, media, public relations, and specialty marketing. At the time of the audit, the dataset reviewed by HMRC showed 83% of workers as independent contractors (outside IR35 or sole traders).
2. How did [the company] become aware they were going to have to go through an audit?
Large business customers in the UK must go through a Business Risk Review (BRR) by their HMRC Customer Compliance Manager at least once every 3 years if their business practices are considered low risk. The BRR will become more frequent if HMRC concludes the client’s business to be medium or high risk at the conclusion of a BRR.
In March 2023, [the company] was informed that it was time to conduct their scheduled BRR, which this time contained a section around off-payroll workers.
3. What did [the company] have to show or prove during the audit? How did they do this?
A business risk review has a wide scope covering many facets of a client's business. Worksome was able to support [the company] with their off-payroll requirements and IR35 classification process. Worksome provided [the company] with a data excerpt of their entire off-payroll workforce (inside IR35, outside IR35, sole traders, paye and statements of work) for the work period set by HMRC. Along with the data set, we provided a comprehensive document detailing the Worksome process and procedures used to ensure we comply with the off-payroll regulations.
4. What was your (Ray) direct involvement in the audit?
I led our team in gathering the dataset* that we returned to [the company] within 3 business days of their request. From then onwards I kept in touch with [the company] on a weekly basis, ensuring we could provide further support if it was needed. But no further questions were raised during the BRR regarding [the company's] off-payroll activities. While our IR35 solution is technology-based, there are always dedicated human resources available to assist clients.
*The dataset included:
- Number of total workers engaged
- Number of workers inside IR35
- Number of workers outside IR35
- Number of workers as sole traders
- Number of workers on our payroll
- Number of workers employed through an umbrella company
- Number of workers on a statement of work
5. What was the ultimate outcome of the audit?
Less than 5 months after [the company] was first informed of the BRR, HMRC confirmed that [the company’s] low risk status would be renewed for a further 3 years.
HMRC has the authority to conduct investigations and reviews into a company’s IR35 processes when there is a suspicion of non-compliance with tax regulations. The frequency and nature of these reviews can vary. Some businesses may be selected for review as part of random checks, while others may be targeted based on specific risk factors or anomalies identified by HMRC's risk assessment processes.
It’s important to ensure your IR35 processes are in order, and it doesn’t need to be as complicated as it’s often made. Learn more about how you can partner with Worksome to solve your IR35 needs by visiting worksome.com/ir-35.
Learn how [the company] is achieving both IR35 compliance and other areas of ROI below.