DMBM565060 - Debt and Return Pursuit: contract settlements: contract settlements payable by instalments
Some content of this manual is being considered for archiving. If there is content you use regularly, please email hmrcmanualsteam@hmrc.gov.uk to let us know as soon as possible.
Contract settlements payable by instalments (agreed in contract)
Contract settlements payable by instalments contain a default clause should payment of an instalment not be made with 14 days after the due date. Under this clause the balance of the amount offered that remains unpaid, including any instalments which have not yet fallen due becomes immediately payable. S86 interest is chargeable on default under the contract.
Because the customer has been given time to pay the normal expected offer for the outstanding tax, interest and penalties the settlement charge is increased to include ‘forward interest’.
Where default occurs before all the instalments become due S86 interest and forward interest could both be charged for the same period. To prevent this overcharge to interest the forward interest element must be removed from the settlement before you request full payment, agree a time to pay arrangement or take enforcement action. See recalculation of forward interest at DMBM565070.
For every case where a contract settlement is payable by instalments (agreed in contract) you will need to obtain from Compliance:
- a copy of their calculation of the forward interest
- a copy of the letter of offer
- a copy of the letter of acceptance
- a statement of assets, if available.