SDLTM82680 - Compliance: Concluding an enquiry

Contract settlements: Introduction: Certificates of tax deposit

When a payment on account of the tax likely to be due in an enquiry case is sought a general payment on account is usually requested. There is, however, nothing to prevent a purchaser from tendering a certificate of tax deposit either as a payment on account or as whole or part of the final settlement. The CTD Team in DMB Banking, Cumbernauld will accept certificates of tax deposit tendered.

The use of a certificate of tax deposit in this way will affect the interest computation and if there is any hint of the use of a certificate of tax deposit a compliance caseworker must find out

• what is intended
• the amount of the deposit to be applied to the settlement
• the date the deposit was made
• the serial number of the certificate of tax deposit

It is for the purchaser to decide how the certificate of tax deposit is to be used and not for the compliance caseworker to offer advice. The certificate of tax deposit can be

• set against tax becoming due (by reference to its normal due date) after the date of the deposit
• set against tax becoming due before the date of the deposit
• set against any other liability (such as interest or penalties)
• repaid

The treatment of interest is described below, depending on what the certificate of tax deposit is applied against or where the certificate of tax deposit is applied.

Tax with a due date after the date of the deposit

Interest will be given by the CTD Team in DMB Banking, Cumbernauld , at a higher rate from the date of the deposit to the due date. The amount allocated against the tax liability is such part of the deposit as, together with interest on itself, equals that tax. The tax is then treated as paid on the due date and no interest will be claimed on that part of the tax.

Tax with a due date on or before the date the deposit was made

No interest will be given on that part of the deposit. The tax is treated as paid on the date the deposit was made and interest on the tax up to that date will be included in the settlement.

If a certificate of tax deposit is to be used in payment, or part payment, in an enquiry settlement, the compliance caseworker should

• obtain details of the certificate (amount, number and date)
• ascertain the purchaser's intentions for the treatment of the deposit, and any balance unused
• agree a settlement date
• telephone the CTD Team in DBM Banking, Cumbernauld on 01236 785202to check what interest is to be credited, giving the expected date on which a payment under the contract offer will be due

The compliance caseworker will then be able to draft the letter of offer, which should refer to the surrender of the certificate of tax and be accompanied by it. This reference to surrender is to avoid any possibility of the purchaser changing his mind about the use of the deposit after a binding contract, including interest based on the deposit, has been concluded.

When you forward form 94A-2 to the CTD Team in DMB Banking, Cumbernauld you should attach the certificate of tax deposit and a typed memo showing how, in accordance with the purchaser's request, the deposit is to be utilised.

A compliance caseworker should submit an enquiry case (This text has been withheld because of exemptions in the Freedom of Information Act 2000)if

• without prior arrangement, a certificate of tax deposit is tendered in settlement or part settlement of an enquiry settlement
• the purchaser claims that the settlement should be re-opened because the interest included therein is now excessive