SDLTM82780 - Compliance: Concluding an enquiry

Contract settlements: Expected offer: Means - Instalments

A standard cash offer is always preferable to an instalment offer as the Exchequer receives it’s money sooner at less cost and risk of default.

There may be cases in which a moderately substandard cash offer will be considered cost- effective compared to a more precisely calculated instalment arrangement.

If it is necessary to consider a formal instalment arrangement, a compliance caseworker must consider

• how much the purchaser can pay on acceptance
• how much by way of instalments
• whether those payments are within their capacity to pay
• what arrangements there are for paying any unpaid post-settlement liabilities
• the additional forward interest

Instalments should normally be payable monthly, but there may be cases in which the purchaser can be relied on to pay quarterly.

There will also be cases in which the purchaser will need, or should be encouraged, to depart from a pattern of equal, equally spaced, instalments.

For example they may be able to afford increasing instalments (perhaps as existing commitments are cleared) or in the case of a seasonal trade larger payments at particular times of the year. Care will need to be taken in wording the instalment offer.

If a compliance caseworker is considering including arrears that have been transferred to Enforcement Office in an instalment offer they should get their agreement to do this and a report of the amounts outstanding.

An instalment arrangement should not be agreed if the expected offer

• is less than £1,500
• would produce monthly instalments of less than £75 each

In agreed instalment arrangements the purchaser should be encouraged to include as large a down payment as he can reasonably afford. Experience suggests a purchaser who makes a material down payment is more likely to complete the arrangement.

On the other hand, if the down payment has been borrowed, the repayments on that loan will have to be taken into account when deciding the level of instalment which the purchaser can afford.

An instalment offer should be negotiated in the usual way. The compliance caseworker should ensure that the proposed instalments are within the purchaser’s capacity to pay. They must bear in mind:

• his normal living expenses
• that payments may need to be spread over a longer period (increasing the payment for time granted)
• the purchaser is not to be asked to enter into an arrangement which, upon a review of his resources, might be beyond his means (indeed it may invalidate the contract).

Instalment period exceeding 2 years

Before the purchaser is invited to enter into an instalment arrangement lasting more than 2 years the compliance manager should approve this means of settlement.

Instalment period exceeding 5 years (exceptional cases)

The Board’s policy is not to bind purchasers to a contract which would involve severe hardship over long periods of time. So it is not normally desirable to commit a purchaser to payments extending over more than five years.

If a compliance caseworker has such a case they should seek advice from (This text has been withheld because of exemptions in the Freedom of Information Act 2000)as soon as it becomes apparent an offer cannot be met within the 5 year period.

It should be noted also that instalment offers over 2 years in length have to be accepted at least at compliance manager level. (This text has been withheld because of exemptions in the Freedom of Information Act 2000)

When setting out the offer of instalments, a compliance caseworker should agree terms with the purchaser and then prepare a letter of offer.

When drafting the letter of offer the points set out at SDLTM82820 should be borne in mind as well as these following additional points

• the instalments should total precisely the amount of the offer. It may be necessary to make one of the instalments a balancing figure
• the total instalments should agree the figures on form 94
• the amounts of the instalments should be precisely stated and the dates of payment should be precisely ascertainable. They should preferably be by reference to the date of the letter of acceptance
• an instalment should not be expressed as to be due by reference to the date of payment of an earlier instalment as that payment might be delayed, though it can be expressed to be as payable by reference to its due date
• if it is necessary to use specific dates the earliest of those dates must be far enough ahead to allow time for the offer to be accepted before the instalment becomes due. Extra time will be required if the offer cannot be accepted locally