SDLTM82720 - Compliance: Concluding an enquiry

Contract settlements: Expected offer: Arriving at the right figure

Once the tax and interest is agreed, and the amount of the mitigated penalty to be suggested has been calculated, the expected offer is arrived at by adding these figures together and rounding the total to the nearest £50.

Any rounding up addition must not

• take the effective penalty above the statutory maximum
• amount to more than 5% of the culpable tax, otherwise the penalty loading will be distorted

Pence should be excluded from the computation.

Form 94 should be used

• to show the components of the expected offer
• for the compliance manager to record approval

Where the offer has to be submitted, a compliance caseworker should at this stage start

• drafting their report
• preparing the schedule of tax lost, interest due, assessments made etc

Preparation of the schedule at the time the computation of unpaid liability and interest is prepared should ensure that nothing is overlooked and that no errors of principle are made in either the tax computation or the calculation of interest or penalties.

Once the expected offer has been calculated it should not normally be departed from unless

• there are real doubts about the strength of the HM Revenue & Customs case
• further evidence, or further argument means it may be incorrect
• there is a means problem which cannot be resolved by allowing time to pay. See SDLTM82730

Normally there would have been a warning of these potential difficulties and the compliance caseworker would have obtained prior approval for alternative acceptable offers. If there are doubts about the strength of a particular case seek advice
The purchaser may claim that they had a reasonable excuse for their failures or that their incorrect land transaction return was not submitted fraudulently or negligently. Any such claim should be considered on its own merits.

Where the purchaser admits the offence but considers that the degree of culpability has been overstated the compliance caseworker will have to discuss their contentions with the purchaser or his agent and try to reach agreement.

The purchaser should be aware of the criteria which are considered, and the relative weight attached to each. See SDLTM86390+.

An offer which exceeds the tax and interest necessarily includes a measure of penalty.

If it is considered that the offer is inadequate but the compliance caseworker has tried and cannot secure any improvement they will have to submit a report, file and recommendations (This text has been withheld because of exemptions in the Freedom of Information Act 2000)

An offer which is no more than the total tax, and interest, should also be submitted if it is considered that there are exceptional circumstances which make it advisable to accept the offer.

Normally, however, it should be explained that stamp duty land tax guidance requires a compliance caseworker in such cases to establish firm liabilities to tax, and interest, and then a careful overall review of the case should be made so that the possibility of formal penalty action may be considered.

Where there is a total lack of response from the purchaser or their agent but there is reason to believe that the purchaser has funds to meet a settlement a personal letter should be sent to the purchaser explaining that:

• a negotiated settlement is the preferred option but without co-operation there is no alternative to the commencement of formal proceedings
• formal proceedings may be suspended if a satisfactory offer is made

If no co-operation is forthcoming then commence formal steps to establish firm liabilities to tax, interest and penalties.