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HMRC internal manual

Enquiry Manual

Contract settlements: expected offer: no co-operation

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

Where there is a total lack of response from the taxpayer or his agent but there is reason to believe that the taxpayer has funds to meet a settlement you should

  • write a personal letter to the taxpayer
  • explain that

    • an agreed settlement is the preferred option, but
    • without co-operation there is no alternative to the commencement of formal proceedings, and
    • formal proceedings may be suspended if a satisfactory offer is made
  • start formal steps to establish firm liabilities to tax, NIC, interest and penalties EM3950+ if no co-operation is forthcoming.

Where Enforcement and Insolvency Service (EIS) has become responsible for collectible arrears, you should

  • consult with that office before

    • formal stand over of any of those arrears or
    • inclusion of any of the tax, etc in a contract settlement.

EIS may already have begun formal recovery proceedings in such cases, and a unilateral suspension of collection by you could put those proceedings at risk.