EM6413 - Contract Settlement: Post Settlement Issues - Reopening a Settlement: Adjusting Figures

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

Where a customer has entered a legally binding contract, we are not obliged to make any adjustments to the settlement figures.

Customers who have settled their liability through a contract settlement must not however be disadvantaged in comparison to taxpayers who have settled formally.   

This means that we should re-open a contract settlement under circumstances where the relevant legislation would have allowed us to alter the assessments/amendments, had the liability been settled in this way.

In considering whether to re-open a settlement you must focus on whether the claim to relief, for example an overpayment relief claim or loss relief claim, is valid and meets the relevant conditions, and not the method of settlement. We cannot under any circumstances re-open a contract settlement to allow a claim if the claim is outside of the relevant statutory time limits, or does not meet the relevant conditions, and relief could not be given in an assessment.    

You must only allow such claims when all the requisite conditions are satisfied other than  been settled by contract.

When you reopen a contract settlement, a varied letter of offer will need to be issued to the customer.  Please contact TALA for suitable wording and enclose the original letter of offer and letter of aceptance in your submission.

Time limits for assessing liabilities that could have been assessed formally but were included in the settlement, should be applied as if assessments were issued on the date the offer was accepted.

You must not accept any attempts to re-open a settlement on general grounds, or because the calculation of the liabilities in the settlement are now being questioned.  

If you cannot accept an application to re-open a settlement, you must send a letter to the taxpayer explaining the reasons.

Where our decision not to allow a relief cannot be appealed, irrespective of the method of settlement, the taxpayer may seek Judicial Review, see ARTG12010.