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HMRC internal manual

Enquiry Manual

HM Revenue & Customs
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Contract settlements: acceptance: check of letter of offer

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

When the letter of offer is returned you should check that

  • any alterations made are acceptable by reference to the criteria in EM6310 and have been initialled by the signatory
  • there are no blank spaces (for example, you cannot accept an offer ‘to pay within ……. days’)
  • the offer has been signed by the person (or all the persons) for whom it was intended (scanned letters must have been signed under manuscript, not electronically)
  • there was no covering letter or other suggestion which could be thought to modify the terms of the offer in any way (for example, a request for more time to pay)
  • the offer if made by a partnership (including husbands and wives) has been signed by each partner
  • the offer was signed within the previous six months EM6327.

You must treat any payment received with the letter of offer as a payment on account for accounting purposes, see EM1937. When the SAFE charge is raised the payment should then be allocated to cover all, or part, of the ‘amount to be demanded’.