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HMRC internal manual

Enquiry Manual

Contract Settlements: Settlement Meeting: Offer Made

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

Acceptable Amount

If the taxpayer proposes a figure which you consider to be acceptable (and which you are satisfied can be paid), you should ask them to put it in writing, normally on a draft you will have prepared in advance, telling the taxpayer that it will be submitted to the Commissioners for HMRC for consideration. If the case is one which can be settled locally, you can say that, when put in proper form, it will be accepted.

Amount Not Acceptable Or No Offer

If you receive an offer which exceeds the duties, NIC and interest then it must include a penalty element. It is for the Commissioners for HMRC to accept or refuse. If you consider it to be unacceptable you should seek an improvement but if none is forthcoming you should make a report with the offer to a Local Compliance Authorising Officer (LCAO).

If you are unable to obtain an acceptable offer you should proceed formally.

In a straightforward case EM3950+ you should

  • issue closure notices, or make all the necessary assessments for all years (subject to the 20 year limit EM3270) in the amounts you consider to be correct, and
  • formally assess or determine penalties, see EM5200+

If there are appeals get them determined, either by agreement or by the tribunal.

The amount of the assessments or closure notices will be based on the evidence available and be to the best of your judgement.