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HMRC internal manual

Enquiry Manual

Contract Settlements: Settlement Meeting: Culpability Disputed

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

If the taxpayer disputes the level of culpability alleged, but is prepared to make an offer equal, or sufficiently close to, the standard offer, you can suggest that he makes the offer by reference to the HMRC allegation without admitting any failure in the letter of offer. If he can agree, you can amend the wording EM6338.

A taxpayer should be asked for his own proposals for the wording of the offer EM6326 where he is prepared to make a satisfactory offer but will not accept the wording suggested above. You can seek advice from contact link.

Occasionally, usually in cases where no penalties are claimed (but a contractual settlement is considered preferable to settlement by assessment and determination) the taxpayer will pay the amount asked without being prepared to sign any form of offer. It will normally be possible to devise a letter of acknowledgement of receipt of the money in a form which will prevent the taxpayer from changing his mind later - see contact link.