ECH21127 - Penalties: How to Conduct the Settlement Meeting

It is important to remember that a contract settlement is just that: a legally binding contract governed by the same law as, say, buying or selling a house.

To create a valid, enforceable contract all parties must be fully aware of all the relevant facts, understand the process, and enter into it willingly.

A penalty settlement meeting should be conducted along the following lines. The manager or experienced caseworker will

• briefly recap the history of the case and the irregularities found
• confirm the agreed figures of liability and interest
• identify the culpable tax, NICs and so on
• state the maximum penalty
• remind the employer or contractor of the details of HMRC's practice, as set out in factsheets EC/FS3 & EC/FS4
• indicate the level of penalty which is considered appropriate by reference to HMRC's guidance
• ask whether there are any mitigating factors which have not already been mentioned
• be prepared to listen and consider revision of the penalty loading
• invite the employer or contractor to make an offer
  
  
• • where necessary suggest the 'expected' figure
  • be firm in their opinion of the 'expected offer'
  • need convincing argument to change that view and
  • remember the offer must not be dictated to the employer or contractor

• help with wording a suitable letter by providing a draft.

Where the offer cannot be accepted locally ( ECH21550), the manager or experienced caseworker should

• explain that any offer will be submitted to the Authorising Officer for consideration on behalf of the Board
• explain acceptance or otherwise rests with the Authorising Officer and
• avoid any indication that the Authorising Officer
  
  
• • is committed to a particular figure or
  • any offer will be 'recommended' for acceptance.

Failure to cover all of the points could lead to an allegation of unfair treatment under the Human Rights Act 1998.