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HMRC internal manual

Enquiry Manual

Contract settlements: expected offer: means - when time to pay is being sought

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

You should

  • bear in mind that the duties forming the basis of the offer are likely to be long overdue
  • remember that the taxpayer is expected to make every effort to find the money promptly once the liabilities have been agreed
  • normally seek payment of the full amount outstanding within 30 days of the date of the letter of acceptance (referred to as the standard offer). Exceptionally, up to 6 months may be allowed, only where the taxpayer needs further time to obtain the funds and it would secure a cash offer.
  • charge interest up to the anticipated date of payment.

If payment depends on an uncertain event, such as the sale of a property you should

  • delay asking the taxpayer to sign an offer
  • allow a period not exceeding six months for the sale provided there is evidence that the property is genuinely on the market
  • review the position after six months and
  • settle the case by the formal route if it appears unlikely that the sale will take place in the near future. A contract cannot be made on the basis of uncertainty.

If, exceptionally, the taxpayer needs a deferment of longer than six months but will be able to pay in full then at a definite future date, you should

  • include interest at the enhanced rate used for an instalment offer EM6250+

    • on the full amount of the expected offer less payments already made
    • from the date to which interest was calculated up to the expected date of payment.

For guidance on instalment offers, see EM6249+.