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HMRC internal manual

Enquiry Manual

Contract settlements: acceptance - letter of acceptance

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

You must not issue a letter of acceptance for an offer until

  • the offer is satisfactory in every respect, see EM6401, and
  • the offer has been authorised by the appropriate Authorising Officer on a Contract Settlement form (CFS) or form 94, see EM6402, and
  • the SAFE charge has been raised and payments on account or set-offs have been correctly accounted for, see EM6410.

You should prepare the acceptance letter as soon as possible after acceptance of the offer has been authorised and the SAFE charge raised. 

The letter does not have to be issued or signed by the Authorising Officer who formally accepted the offer by signing the CSF or form 94, see EM6402.

There are two versions of the letter of acceptance, which are available in SEES Forms and Letters.

The correct letter to use will depend on the basis for payment set out in the offer.

You should use LoA 1, if you are accepting a single payment offer or LoA 2, if you are accepting an instalment offer.

Do not amend or add anything to the text of these standard letters. If you need contact the taxpayer about any other matter, use a separate letter.

When completing the SEES letters, you should  follow any the instructions on the SEES input screen. In addition you should also make sure that

  • If an agent is acting, the heading of the letter should include the name of each person who has made the offer, especially in cases where a Joint and Several company offer has been made. If there is no agent, you should address the acceptance letter to all the persons making the offer, with a copy for each signatory.
  • You check that the due date is the same as the date in the letter of offer, normally 30 days from the date of the acceptance letter. The SAFE Stencil should show the payment date as 3 days plus the number of days specified in the offer, see EM6403.

Other points to note are that

  • An offer with a suspended penalty is treated as an instalment offer. The penalty being an instalment which may or may not have to be paid at the end of the suspension period, so use SEES letter LoA2.
  • The gross offer includes amounts that have already been paid on account and any suspended penalty amount.
  • The net offer is what remains to be paid. This is the gross offer less any payments on account and set-offs. Any suspended penalties must also be excluded, as these are only due later if the person fails to meet the suspension conditions.