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When HM Revenue & Customs (HMRC) have found that a taxpayer has paid less tax than the correct amount due, they will look to reach a settlement. There are some key things to consider when reaching a settlement with HMRC.

 

What is a settlement?

A settlement signifies the conclusion of any enquiry or investigation.  A settlement may be referred to in a number of different ways including a “Contract Settlement”, “Letter of Offer” or “Deed of Settlement”.

Either way, a settlement is a written agreement, which is legally binding, between a taxpayer and HMRC.

The settlement will include a summary of the tax year(s) involved and the amount of the tax, interest and potentially penalties due.

 

How can taxpayers minimise the cost of reaching a settlement with HMRC?

It may take time to establish all the relevant facts and determine exactly how much is owed to HMRC.

Whenever a tax liability is identified, I’d recommended making a payment to HMRC on account. In doing so, any further interest charges will be stopped on the amount paid.

Where a taxpayer does not have the financial means to make potentially large payments to HMRC, consideration  should be given to making regular, but smaller, payments instead as soon as any liability is identified.

It is also worth considering whether Voluntary Restitution could be applied. If it can, any interest for late payments is avoided.  Even though a penalty is applicable, there may be a way to get it suspended.

 

What if a taxpayer cannot afford what has been agreed in the Settlement?

In this circumstance, doing nothing is not an option.

A settlement is legally binding on all parties.  If the settlement needs to be revised, taxpayers are urged to approach HMRC as early as possible in order to avoid being in default.

In doing so, HMRC may agree to extending the repayment period.

 

For help with an HMRC settlement or any other tax matter, get in touch with our team using the options below.

 

You can view more information on tax investigations here.

If you cannot find the information you need on our website, please contact Paul Malin or Andy Maxfield using our contact form or email directly to pmalin@hwca.com or amaxfield@hwca.com

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