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HMRC internal manual

Enquiry Manual

HM Revenue & Customs
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Contract settlements: acceptance: SAFE - instalment offers

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

An instalment arrangement will normally cover the gross amount payable under the terms of the offer less any general payments on account and set-offs.

On form 94 or compliance settlement form (CSF)

  • the ‘net offer’” is the gross offer less any payments made against assessments within the scope of the settlement and less any CTA10/S458 relief already due or already deferred
  • the ‘amount to be demanded’ is the amount payable after we have taken account of any general payments on account and set-offs.

For SAFE accounting purposes all general payments on account and set-offs must be included in the instalment arrangement because the ‘net offer’ has to be accounted for in full. This is in contrast to a lump sum offer where the amount to be demanded is the balance due after any payments on account or set-offs have been accounted for.

In instalment cases, you must therefore

  • add the total general payments on account and set-offs to the amount of the first instalment, or preferably
  • create an additional instalment equal to the general payments on account and set-offs. The due date for the additional instalment must be the same as the first proper instalment.

For example, a taxpayer offers to pay the sum of £50,000 made up in the following way.

  • £2,000 has been paid on assessments raised
  • £5,500 has been overpaid on the taxpayer’s SA Statement
  • £4,500 has been paid on account and is held in SAFE
  • £8,000 to be paid within 30 days of the offer being accepted
  • £30,000 to be paid by 10 instalments of £3,000 each, on or before the last day of each succeeding month.

The letter of acceptance is prepared on 12 July 2007 and issued on 13 July.

Note: Acceptance letters must not be issued until the SAFE charge has been raised.

In this example you would instruct the SAFE nominee or, if you work in Local Compliance, the Centralised SAFE Team on the appropriate SAFE contact stencil, to raise a charge for the net offer of £48,000 as follows

  • a first instalment of £18,000 due on 15 August 2007, or preferably
  • a first instalment of £10,000 and a second instalment of £8,000 both due on 15 August, followed by 
  • 10 instalments of £3,000, the first such instalment due on or before 30 September 2007.

Note: An additional three days must be added for the first instalment on the SAFE stencil.

The amount and due date for each instalment must be listed on the SAFE contract stencil. You must also make sure that any payments held on SA or any other Head of Duty system are transferred to SAFE so that they are available to cover all, or part, of the first instalment(s), see EM6403.

Action by SAFE Nominees or Centralised SAFE Team

The SAFE system will automatically set the date of the second and subsequent instalments to the same date in the month as the first instalment(s). In the example above this would be 15 September 2007, 15 October etc instead of 30 September and 30 October etc.

To avoid manually amending the due date of all subsequent payments, the SAFE nominee or Centralised SAFE Team can enter the date of the first instalment as the month end date (in the above example 31 August 2007) so that the second and subsequent due dates will be set automatically to the correct dates. Once these have been set, the SAFE nominee or centralised SAFE Team must amend the due date for the first instalment to the correct due date. In the above example, this is 15 August 2007.

Payment by Direct Debit - action by caseworkers

You must follow the guidance above and complete the SAFE contract stencil in full where payments are going to be made by direct debit. The procedures for paying by direct debit are explained in EM6256.