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HMRC internal manual

Inheritance Tax Manual

Settling the penalty: acceptable offer made

If the taxpayer proposes an acceptable figure for the penalty then the offer will need to be put into writing, in the form of a letter of offer (IHTM36331), before the penalty is settled. The draft letter of offer may have been issued when you first informed the taxpayer that you are seeking a penalty (IHTM36224) but if not a draft letter should be issued at this stage.

This is important because for the settlement to be effective it must normally result in a legally binding and enforceable contract between the taxpayer and the Board. The contract comes into existence when a letter of offer signed by or on behalf of the taxpayer is accepted by or on behalf of the Board. It substitutes a new liability under the law of contract in place of the previously existing liabilities to tax, interest and penalties imposed by Inheritance Tax Act 1984 and other legislation.