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HMRC internal manual

Enquiry Manual

Contract settlements: acceptance: SAFE - company offers & S455 liabilities

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

Where a company offer includes CTA10/S455 liabilities which are expected to be covered by CTA10/S458 relief arising from

  • a proposed write off, or
  • future repayment of the loan

they are included in the offer as an instalment due on a date by which the relief is expected to arise. The company will be required to pay the instalment unless a claim to relief under S458 has been agreed by the due date for that instalment, see EM8646.

A SAFE charge should be created for the ‘net offer’ shown on the contract settlement form (CSF) or part 3 of form 94. This is the Gross offer less any S458 relief already due or becoming due on a loan that has already been repaid (shown on part 3 of form 94 as “S458 set off”).

For SAFE accounting purposes, the charge should be shown on the appropriate SAFE contract stencil as payable by instalments. This is to account for the S455 liabilities, even if there are only 2 payments, the S455 instalment being the final one.

If however, a valid claim to S458 relief is received in advance of the instalment due date, you instruct the SAFE nominee or, if you work in Local Compliance, the Centralised SAFE Team, to reduce the charge by the amount of the S455 instalment, see EM6408.

The following is an example of how a company offer that includes S455 liabilities may look.

“…………………jointly and severally offer the sum of £80,000 to be paid or satisfied as follows.

£10,000 to be satisfied by relief already due under S458,

£20,000 to be paid within 30 days of the date of your letter notifying acceptance of this offer,

£15,000 to be satisfied by set off of £15,000 relief due under Section 458 on 1/10/07,

£35,000 to be paid on or before 1/10/09, provided that this sum shall not be payable, then or at all, if, before the date on which the payment becomes due, the inspector has received a claim under S458 and agreed relief from an amount of tax equal to the amount of the said £35,000.”

This would be accounted for on SAFE as follows.

A SAFE charge would be created for a net offer of £55,000 (£80,000 - (£10,000 + £15,000)) payable in 2 instalments of

  • £20,000 within 30 days of acceptance
  • £35,000 on 1/10/09.

The charge would be reduced by £35,000 to £20,000 if a valid claim to S458 relief was agreed on or before 1/10/09.

SAFE Address details

When you enter a reference in SAFE it obtains name and address details from the appropriate main system. In the case of a company the address normally held on COTAX will be the “registered office” not the trading address. There is no facility in SAFE to amend these details.

If your enquiry correspondence has been sent to the trading address and this is where the notice to pay should be issued you can, exceptionally, ask the Miscellaneous Charges Unit DMB to set up a pseudo reference that will enable you to specify the trading address.