CCM14200 - Closing the Enquiry: Adjustment needed to the claim and penalties appropriate: Overview of settlement including penalties

In these cases your enquiry will have established an incorrect claim and in addition to being able to revise the award the guidance at CCM Chapter 10, see CCM10000 will have shown you need to seek a penalty.

Remember you can only ever make one S19 decision at the conclusion of each year’s enquiry. It is therefore important that you have all the information you need in order to correct each award as necessary. If you make a mistake when amending any award you will not be able to go back and amend the decision again.

The way in which you close an enquiry involving a penalty is very different to the position where there is no penalty. HMRC’s preferred method of settling a case involving a penalty is with a contract letter of offer. However a letter of offer should only include the overpayment where there is no ongoing entitlement to tax credits. If there is an ongoing entitlement to tax credits you should leave the overpayment of tax credits for the system to deal with and seek a penalty letter of offer only.

There will be a number of stages involved in a case where you intend to seek a penalty and these can be summarised as follows:-

• are adjustments needed for an earlier or later year(s) – see CCM14205
• who will meet the settlement – see CCM14210
• is a settlement meeting needed – see CCM14218
• issuing the penalty leaflet – see CCM14220
• obtaining a certificate of full disclosure – see CCM14250
• amending the award – see CCM14260
• establishing ability to meet the settlement – see CCM14280
• calculating the penalties and interest – see CCM14330
• inviting the letter of offer – see CCM14340
• accepting the letter of offer – see CCM14380
• noting TCW and NTC core – see CCM14410
• closing the office records and retaining papers

Although each of these are individual stages which need to be considered in the order shown above, in practice you need to be aware of each of them throughout your enquiry so that you and the claimant are aware of what happens next.

In view of the interest implications ( CCM14330) it might be appropriate to invite an early payment on account of the eventual settlement. You should not do this until you have established the claim was incorrect and we have no right to demand that they make such a payment. However, if there is likely to be an overpayment and interest is already running (or will shortly begin to run) it is only fair that you warn the claimant of this. If they make such a payment see CCM8720.