COM71121 - Enquiries: CTSA enquiries: closing an enquiry: closing an enquiry: contract settlements (Action Guide)
To close an enquiry in a contract settlement case involving any CTSA AP, consider steps 1 - 25 below. The guide is presented as follows.
| Action | Steps |
|---|---|
| Warning | Step 1 - 4 |
| Reviewing the company’s accounting record | Steps 5 - 6 |
| Existing assessments and penalty determinations | Step 7 |
| Payments | Steps 8 - 10 |
| Informal discharge | Steps 11 - 12 |
| Interest | Steps 13 - 14 |
| Late filing penalties | Steps 15 - 17 |
| Making set-offs against the settlement charge | Steps 18 - 21 |
| Function MAPS | Steps 22 - 24 |
| Interaction with Caseflow or CQI | Step 25 |
Warning
1. At EM6001, the Enquiry Manual tells you to be particularly careful not to issue anything which could be construed as a closure notice when you intend to conclude an enquiry by contract settlement. Do not thereforeuse function RAMA (Record / Amend Assessment) option prepare a closure notice with rev amdt’ option to issue a closure notice.
2. If the company or agent insist on the issue of a formal closure notice before negotiating a contract settlement, see the Enquiry Manual at EM6001. See EM1990 if the Tribunal has directed that a closure notice be issued.
3. In these limited circumstances, use function RAMA option ‘prepare a closure notice with rev amdt’ to issue the closure notice with revenue amendment.
4. COTAX inhibits automatic repayments and reallocations for 14 days to give you time to deal with the consequences of your enquiry, especially, for example, where you are amending more than one return at the same time. If necessary, you can also use function MRSC (Maintain Repay / Realloc Signals (Company)) to inhibit reallocations or repayments to or from any AP of the company for a longer period.
Reviewing the company’s accounting record
5. Before you complete form 94 and draft the letter of offer, use function VPPD (View Payment and Posting Details) to review the company’s accounting record for all relevant APs.
6. In the offer, include the whole of the finally agreed liability for APs subject to an open enquiry and show credit for payments made.
Existing assessments and penalty determinations
7. Leave undisturbed any assessments, including self assessments and late filing penalties on the COTAX record for relevant APs. Do not make any new ones.
Payments
8. Leave undisturbed any payments made against assessments, related late payment interest and late filing penalties on the COTAX record for relevant APs which are included in the gross offer.
9. Treat all such payments as ‘paid against assessments’ for the purposes of forms 94 and the SAFE stencil. See EM6403.
10. If, exceptionally, the company has paid more than the liabilities recorded on COTAX so that the AP is shown as overpaid, do not include the overpaid amount within the amount you record as ‘paid against assessments’ in part 3 of form 94. Instead, show it further down form 94 as an amount to be reallocated against the settlement charge.
Follow steps 19 - 21 below.
Informal discharge
11. Use function RINF (Record Informal Discharge) to informally discharge all unpaid liabilities to tax, interest and late filing penalties for APs included in the settlement, but see step 12 if it is a quarterly payer case.
12. Use function DAPD (Display AP Details) to check if there is a posting for debit or credit interest on the COTAX record for the AP. If there is, use function MAPS (Maintain AP Signals) to set the Credit / Debit Interest Indicator (CDII) (Word 29KB) signal to prevent an unwanted recalculation of debit or credit interest after you have made an informal discharge. On the same day use function RINF to informally discharge the unpaid liabilities.
Interest
13. Do not assume that the interest position reflected in the postings in function VPPD is finally complete and correct.
14. Use function CINT (Compute Interest) to calculate the correct interest due under S87A TMA 1970 up to the date when you expect the settlement charge to be paid. Calculate interest on those duties included in the contract settlement. Give credit for any interest already paid on the duties included in the settlement as ‘amounts paid against assessments’.
Late filing penalties
15. For the purposes of the contract settlement, exclude penalties determined and paid and leave the payments on the COTAX record.
16. If all or part of the penalty has not been paid, include the penalty in the contract settlement and give credit for any amount paid as an amount ‘paid against assessments’.
17. Where any late filing penalties have not yet been determined:
- do not make a determination
- use function MPEN (Maintain Penalty Signals) to set the ‘no penalty required’ (NPR) signal
- include the penalty in the settlement.
Making set-offs against the settlement charge
18. Follow the guidance at EM6403 to EM6408 and use the R90A procedure to set off a repayment due for an AP or duty outside the scope of COTAX against the settlement charge.
19. Use function REOD (Direct Reallocation Out Of COTAX) if you need to reallocate an overpayment on the COTAX record to the contract settlement charge held by the Network Unit. See COM122060 for more information.
If the overpayment is for an AP outside the enquiry period, use function RINT to calculate the correct repayment interest and note it using the function NOTE – please also note the expected date of Payment for the amounts in question.
If the overpayment is for an AP within the enquiry period, you will have taken it into account in your calculations of interest included in the settlement, and no repayment interest needs to be added to the reallocation.
20. Whether you make the set-off under the R90A procedure or using function REOD, you must enter the details on form 94 and the SAFE stencil. Complete the Intelligent Payment Processing (IPP) Single Form asking for the money to be reallocated against the contract settlement charge. Allow sufficient time for the set off to reach SAFE before issuing the stencil to the SAFE nominee.
21. If an overpayment recorded on COTAX for an enquiry AP exceeds the amount you need to reallocate to cover the contract settlement charge, you should reallocate the necessary amount using function REOD and use function REWD (Direct Reallocation Within COTAX) to reallocate it against other liabilities Function or DIRR (Direct Repayment) to repay the balance to the company.
Function MAPS
Once you have made all the necessary changes to the COTAX record, you need to tell COTAX that the enquiry has been concluded.
22. You normally use function MAPS (Maintain AP Signals) to enter the enquiry ended date equal to the date that the settlement offer is accepted, which sets the ‘enquiry in progress’ signal to ‘N’.
23. However, if you have already recorded a revenue amendment because the company or agent insisted on a formal closure notice, do not use function MAPS as COTAX automatically entered the date of issue of the closure notice as the enquiry end date and set the ‘enquiry in progress’ signal to ‘N’ when the revenue amendment was recorded.
24. Use function MRSC (Maintain Repay / Realloc Signals (Company)) to uninhibit reallocations or repayments to or from any AP of the company if you inhibited them at step 4.
Interaction with Caseflow or CQI
25. If your office uses Caseflow or CQI, update it with the settlement details once the enquiry is settled in COTAX.