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HMRC internal manual

Specialist Investigations Operational Guidance

Settlement by agreement: offers: types of non-standard offer

Some offers are not contract offers at all

Some settlement agreements (almost wholly in Code 8 cases) are not contract offers at all because they do not substitute a new contract liability for an existing or statutorily imposed liability. For example a Code 8 case might be concluded by way of a Section 54 TMA 1970 agreement, with a further agreement between the taxpayer and SI about peripheral issues.

In some offers there are no defined liabilities

These are the ‘global’ offer cases. They are contract offers. They are described further at SIOG9500 and onwards.

Some offers are not made by the taxpayer

Some offers to SI are made by a professional adviser on behalf of a taxpayer. These may be acceptable provided:

  • the adviser is an accountant or solicitor of good repute
  • the adviser states that the client has authorised the offer (and we are provided with a copy of the authority)
  • there is no reason to doubt the good faith of the taxpayer in relation to the offer
  • the offer features immediate or imminent payment
  • the offer preserves HMRC’s right to set aside the offer and proceed alternatively in the event of non-payment or dispute.

Any instalment offer must be made by the taxpayer personally.

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Some offers do not accept default

In some cases (both where duties can be specified and where the settlement is global) there is a refusal to accept default.

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In appropriate cases it may be possible to proceed on this basis. The Team Leader’s advice should always be obtained before any commitment is made. The offer must fully preserve HMRC’s rights, and specifically not prejudice our ability to make a formal penalty determination in the event of default, that is there must be consideration.

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Legal Charge

In instalment offers (SIOG9450) there may often be a need for security during the payment period.

One way this is achieved is by the taxpayer granting a legal charge over property.

It is essential that:

  • the wording of the offer is correct
  • the ancillary forms are completed
  • Solicitor’s Office advice has been taken on any points of difficulty
  • Solicitor’s Office are advised before a company offer incorporating a charge has been made, and they get the papers quickly thereafter, as they have only a limited period in which to register the charge.

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‘Joint and several’ offers

A joint and several offer is one where a company and an individual (usually a Director of the company) jointly make an offer in respect of corporate liabilities. The objective is to bind the individual into the requirements of the offer so that in the event of default we can proceed under the terms of the offer against the individual as well as the company.

Examples of the wording that might be adopted are in the Appendices of the Enquiry Manual.

Company Offer made by a Director

Sometimes a director wishes to make an offer personally in respect of company irregularities brought about by the directors’ own misappropriations. It is only in exceptional cases that such an offer may be encouraged and where the director is still with the company the negotiations should normally be with the company. However, where there has been a take-over and the directors’ defalcations are discovered after they have left the company, it may be possible to negotiate with the individual. The Team Leader’s advice will always be necessary before any commitments are made.

Non-Money Offer (‘In specie’ offer)

Occasionally, in an extreme means restricted case, a taxpayer may offer to transfer property, goods or less tangible assets to HMRC as consideration in a contract offer.

There is seldom any advantage to HMRC in this. If the property is worth what the taxpayer claims it could be realised and the proceeds paid over on a normal basis.

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Other specialised and contingent offers

In extreme means restricted cases, a taxpayer may offer to pay a proportion of net profits or income, or of the realisation value of assets, or payment of a fixed amount subject to contingencies.

Offers of this kind should only be considered as a last resort. It is extraordinarily difficult to draw up a letter of offer that is legally enforceable where there are such contingencies.

It may well be better to get assessments and determinations formally determined.

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Such offers are not to be encouraged and it is only in the most exceptional circumstances that the Commissioners of Revenue and Customs would wish to consider this type of arrangement.