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HMRC internal manual

Compliance Operational Guidance

Supporting Guidance: employer compliance: guidance by subject: letter of offer: preparation

A typed letter of offer COG914505 should be prepared using the appropriate specimen.

It should be prepared on plain paper. Paper with a HMRC heading or crest should not be used. There is no objection to the employer/contractor retyping the specimen letter provided on to its own headed notepaper. But it must be carefully examined to make sure it does not contain errors.

Unless the amount of the offer and time for payment have already been agreed in discussions these entries should be left blank. The employer or contractor should complete them. This avoids accusations of the caseworker or manager dictating terms or being unwilling to listen at the settlement meeting/discussion.

A letter of offer is just that - a letter - and should therefore flow and make sense. When completing a draft letter of offer you should consider the following dos and don’ts:


  • remove all unnecessary brackets, asterisks and so on
  • attempt to get the offer on a single sheet of paper
  • make sure you have the correct legal entity
  • use the trading address of the employer/contractor if the Registered Office is remote or the accountant’s address
  • use the appropriate wording in instalment cases (COG914555)
  • include the reference number if it will facilitate the early return of offer. This should not be inserted in any place that will interfere with the text of the offer
  • leave odd pence in the offer where payments on account included them (it is more costly and time consuming to HMRC to ‘balance the books’ otherwise)
  • list each year or tax period and nature of liability separately
  • include all voluntary tax paid on behalf of employees in statement B and make sure ‘grossing up’ is done in the year of settlement (COG908060)
  • include NIC on tax borne in statement B
  • include all other Class 1 and Class 1A in statement A
  • list the ‘nature of liability’ as ‘Income Tax’, ‘National Insurance Contributions’ or ‘Construction Industry Scheme Deductions’
  • get signatories to print their name
  • remove the line ‘less paid’ if no payments on account have been made
  • remove interest clauses where payment in full has already been made
  • where possible ask a colleague to check your draft before it is issued
  • seek advice from TALA Liverpool (This content has been withheld because of exemptions in the Freedom of Information Act 2000) see COG904770).


  • include time barred NIC in the offer. This should be included in a separate offer of restitution where the employer agrees to settle (COG915015)
  • allow the use of ‘full and final settlement’ in the offer (EM6343)
  • list or name inaccuracies in the offer. This does not add to or clarify the position. Computations previously agreed with the employer/contractor should have made it clear what you are proposing to include in the offer
  • list NIC as Class 1 or Class 1A (see above)
  • agree specific dates for settling the balance or for instalments unless these are far enough in advance to be achievable
  • seek further payments on account once you have reached the offer stage as this can invalidate the offer
  • forget that we only create a legally binding contract when we issue the letter of acceptance (COG914570). Any deficiencies can be rectified if identified in time.