Supporting Guidance: employer compliance: guidance by subject: settlement: contract settlements - SAFE: lump sum offers with more than 30 days to pay
Standard lump sum offers are normally payable within 30 days of acceptance. However, an employer/contractor may occasionally seek additional time to pay and up to 6 months may be allowed if
- the employer/contractor needs further time to obtain the funds and it would secure a cash offer (EM6235) and
- interest has been charged to the expected date of payment (COG908170 - Calculating Interest).
Where a lump sum offer with a payment date of more than 30 days has been accepted and payments on account are held the offer will need to be set up on SAFE for ‘accounting purposes’ as an instalment offer with 2 payments. This is because payments on account do not cut across to a charge until 30 days before the due date for payment. This means any payments on account would not be reflected in a ‘notice to pay’ issued more than 30 days before the due date.
For example, a SAFE charge for £20,000 is raised on 10/1/09, the same date on which the letter of acceptance is issued.
£10,000 has already been paid on account.
The balance of £10,000 is due on 1/4/09.
A notice to pay in the sum of £20,000 is issued on or shortly after 10/1/09. This is because the payment on account of £10,000 does not cut across to the charge until 1/3/09.
The notice to pay is issued automatically by SAFE after a charge is raised. In order to avoid it being issued in an excessive amount payments on account should be treated as an instalment becoming due 30 days from the date of the letter of acceptance and the balance to be paid as a second instalment payable by the date specified in the letter of offer.
In this example an instalment offer would be set out on the SAFE stencil as follows
- a first instalment of £10,000 due on 9/2/09 and
- a second instalment of £10,000 due on 1/4/09.