EM6256 - Contract settlements: expected offer: instalments - direct debit

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

Direct debit is the preferred method of payment for instalment offers.

It is not possible to pay by Standing Order but there are several alternative methods of payment which are explained in the acceptance letter, see EM6410.

You should invite the customer to pay by direct debit at the settlement meeting or, if one is not held, when the draft letter of offer is sent.

If the customer indicates they wish to pay by direct debit, you should make them aware of the following procedure and give them the information they will need to set up the direct debit instruction. If you do not hold a settlement meeting you will need to explain this in writing.

Direct Debit Procedure

If a customer indicates they wish to pay by direct debit you should make them aware that they must personally set up a direct debit.

They can do this by phoning the Contract Settlement Unit (CSU) on 0300 322 9204. You cannot do this on their behalf. They cannot set up an instruction without a 14 character SAFE Charge reference number. This will be included in the acceptance letter.

When setting up the direct debit the customer will need to provide the CSU with the following details

  • the SAFE Charge reference number (14 characters long)
  • the name on the account from which the payments are to be made
  • the account number and sort code
  • details of the agreed dates and amounts of the initial and subsequent payments included in the settlement, or details of the payment(s) on account they wish to make.

You should advise the customer to allow a minimum of 21 days between the date they set up the direct debit and the date on which the first payment is to be debited.

There are certain circumstances when a written direct debit is required. These are where

  • more than one signature is required on the customer’s bank account, or
  • the customer insists on completing a written instruction.

Under these circumstances you should

  • print and issue a paper DDI to the customer
  • ask the customer to complete and return the form directly to you, and
  • send the completed form with details of the agreed payment details to the CSU.

Post is directed to the CSU either

  • digitally using the Digital Mail Service (DMS) and the DMS recategorisation tool to their queue DMB-IDU-Specialist
  • by paper to HM Revenue and Customs, BX9 1QH, United Kingdom where it’ll be scanned.

The general guidance on SAFE at EM6403 and EM6404 should be followed whatever payment method is used.

It is important that the letter of offer itself does not refer specifically to payment by direct debit. This could restrict our ability to recover amounts owed by other means in the event of default. A standard form of words should therefore be used. There are examples at EM6253, EM6254 and EM6255. Those examples provide for payment on or before the last day of each month and you should keep to that. This will enable collection by direct debit on the date in each month chosen by the customer.