Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

Enquiry Manual

From
HM Revenue & Customs
Updated
, see all updates

Contract settlements: expected offer: instalments - 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.

You must only consider an instalment offer if you are confident that the tax payer will have sufficient means throughout the period covered by the instalments plan and will not default on the payments, see EM6214.

A slightly substandard cash offer is often preferable to a more precisely calculated instalment offer because

  • we get what is due to us sooner
  • there is less cost and risk of default
  • it is more cost effective.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000) (This content has been withheld because of exemptions in the Freedom of Information Act 2000) (This content has been withheld because of exemptions in the Freedom of Information Act 2000)

If there is no alternative to an instalment arrangement, you must consider

  • how much the taxpayer can pay within the agreed period following acceptance (normally 30 days)
  • how much the taxpayer can pay per instalment
  • the additional forward interest, see EM6250
  • how long the instalment period will then need to run for
  • whether all these payments are within the taxpayer’s capacity to pay.

It is usually better to allow unpaid liabilities for post-enquiry years to remain on the SA Statement and not bring them into your settlement. You will however need to consider whether the taxpayer will be able to pay these before agreeing to an instalment arrangement.

Instalments should normally be payable monthly, but there may be cases in which the taxpayer can be relied on to pay quarterly.

There will also be cases in which the taxpayer will need, or should be encouraged, to depart from a pattern of equal, equally-spaced, instalments. For example, they may be able to afford increasing instalments (perhaps as existing commitments are cleared) or, in the case of a seasonal trade, larger payments at particular times of the year. Take care how any payment by instalment option is worded in the offer, (see examples at EM6254 and EM6255).