EM6342 - Contract settlements: letters of offer: detail - exclusion clauses

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

In complex cases, HMRC may wish to settle most parts of an enquiry whilst allowing specific aspects to remain open. To enable this, an additional clause can be inserted into the letter of offer to exclude uppaid duties for a period within the enquiry which are not included in the settlement.

This will make clear to the customer that the enquiry is not settled by the letter of acceptance, and which aspects of the enquiry remain ongoing.

A contract settlement effectively closes a statutory self-assessment enquiry and the legislation only allows HMRC to enquire into any return once. Care is therefore needed when drafting any exclusion clause to ensure it is clear the enquiry isn't closed.

This situation was legislated in FA (no 2) 2017 which received Royal assent in November 2017 introducing partial closure notices. However, the same result has been achieved with a carefully drawn up contract for many years.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)