The guidance about contract settlements at EM6000+ only relates to direct tax. You must never include VAT or VAT penalties in a contract settlement.

At the time you provide the taxpayer with your calculation of tax and NIC lost, you should also calculate the interest arising under TMA70/S86.

If you are dealing with a pre-6 April 1994 partnership (an ‘old’ partnership) for 1996/97 see however EM4010+.

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