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HMRC internal manual

Compliance Handbook

Charging penalties: contract settlement: offers including a suspended penalty

If a suspended penalty is included in the settlement, the suspended penalty must be set up as a final instalment.

The end of the suspension period is the date of the instalment. The instalment will be payable only if the person does not satisfy HMRC that the suspension conditions were met or they incur another penalty during the suspension period.

If more than one suspended penalty is to be included in the offer a separate instalment must be included for each one.

Draft letters of offer which are to be used where payment of all or part of the penalty is suspended are at EMapp1.

The letters of offer make reference to a letter from an Officer of Revenue and Customs that specifies the suspension conditions. The letter referred to is the NPPS100 which must be issued to the taxpayer in all contract settlement cases that include a suspended penalty, see CH408000.

We can only accept an offer to pay by instalments if the suspended penalty is the final instalment. If the person can only fund an instalment offer where instalments will fall after the date the suspended penalty may become due, you cannot enter into a contract settlement. You must issue assessments for the additional tax and penalties. The person will then need to discuss payment arrangements with DM.

In no circumstances should the suspension period be artificially lengthened to match any instalment arrangement. The suspension period must be the minimum time required for the person to demonstrate they have met the suspension conditions.

However, if the duration of the payment terms in the contract is less than the suspension period, the contract must be lengthened to equal that of the suspension period. For example, if the person offers to pay over 6 months and the suspension period is 12 months, the contract will run for 12 months.

Note: The ‘Net Offer’ amount on the SAFE Class 1 contract settlement stencil has to be reduced by the amount of the suspended penalties included in the contract.