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HMRC internal manual

Enquiry Manual

Contract Settlements: Surcharge: Inclusion

The guidance about contract settlements at EM6000+ only relates to direct tax. You must never include VAT or VAT penalties in a contract settlement.

Once you have decided which duties are culpable for penalty purposes, you can then decide whether you need to include any surcharge liability within the proposed settlement. See EM4100+.

You cannot charge surcharge on any duties on which you are intending to take tax-geared penalties (TMA70/S59C (4)) EM4103.

If any surcharge is included in the settlement, you can only include interest on that surcharge to the extent that the surcharge has already been formally imposed because the interest only arises from 30 days after the date of imposition. The same principle applies to interest on penalties.