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HMRC internal manual

Enquiry Manual

HM Revenue & Customs
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Contract settlements: expected offer: means - general

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

It is essential that we do not enter into a contract settlement if there is any doubt about the taxpayer’s ability to pay the expected offer, either by lump sum or by instalments.

On this page we refer to an offer to settle contract for the full amount of tax, interest and penalties that are due as a standard offer.

Where the taxpayer says that they cannot meet a standard offer, or it appears to you that they may not be able to pay, you must

  • review their financial position very carefully, following EM6215 to EM6217 
  • explain that they are expected to use every possible way to meet their obligations and pay the tax, interest and any penalties that are due.

You may need to discuss whether the taxpayer can realise some of their assets so that they can pay the amounts due, see EM6215 to EM6217.

Be prepared to take very quick action if you become aware that the taxpayer

  • may be facing bankruptcy or insolvency proceedings, see EM6230, or
  • may be considering leaving the United Kingdom permanently, see EM6231.

If your review of the taxpayer’s financial position shows that the taxpayer should be able to make a standard offer, and you can agree the offer with the taxpayer, follow the normal procedures for contract settlement.

If your review of the taxpayers financial position shows that the taxpayer should be able to make a standard offer, but they do not make an acceptable offer, see EM6234.

If your review of the taxpayer’s financial position shows that the taxpayer is unable to make a standard offer, consider the following options as appropriate.

  • A contract settlement with a longer time to pay, see EM6235.
  • Settling for an appropriate number of years, see EM6237 to EM6239, depending on the amount of capital and income available.
  • A contract settlement that includes an instalment arrangement, see EM6249+
  • A legal charge over property, see EM6236.

See EM5213 for further guidance on

  • penalties where means are an issue
  • interaction with publishing details of deliberate defaulters (PDDD) and managing serious defaulters (MSD).

When considering a persons means, if you have not already done so, you should obtain a written statement of

  • the taxpayer’s income and expenditure, using the SEES template or the corporate debt questionnaire in the DMB Manual
  • the taxpayer’s assets, using SEES form MS142, drawn at a very recent specified date and certified by the taxpayer as complete and correct.

Include all assets and liabilities in the name of the taxpayer, their spouse, civil partner or domestic partner, children, or anyone to whom the taxpayer has transferred assets, if you can obtain their co-operation for this purpose.

You should also ensure that details of any likely alterations in the next 3 to 5 years are highlighted such as

  • the maturing of an endowment policy
  • the termination of a lease affecting the value of the taxpayer’s freehold interest
  • impending retirement
  • children leaving school
  • loans paid off.

If you have already received a statement of assets and examined the taxpayer’s income and expenditure in order to establish the correct tax position. These can be re-examined and updated to enable you to consider the taxpayer’s means.

Once you have obtained these details, you should review them following EM6215.