They prepared a false tax return with overstated income for my client to submit in order for him to obtain a much larger mortgage than he could get based on his real earnings.
After a severe dressing down he has realised the error of his ways.
It hasn't been submitted but its a concern that this sort of thing is going on - preying on the self employed.
Replies (36)
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This from their website
Where no accounts have been produced our in house accountants will review Self Employed and Small Company books in preparation for securing loans and mortgages for Residential, Buy-to-Let or Commercial borrowing. Our accountancy service is key to all mortgage products. The work that we do with our customers and their accountants ensures that we can obtain for them the most competitive funding.
What fun!!
Whois of that site comes up with:
Registrant Name: RICHARD SIXSMITH
Registrant Phone: +44.01204543934
Search of that number comes up of estate agents in Whittle-le-Woods.
Then found news article stating a Mortgage Broker called Richard Sixsmith of Whittle Le Woods was banned as a director and is disquallified until 2020!
Link Here : http://www.placenorthwest.co.uk/news/archive/11159-mortgage-broker-disqu...
If you have concerns you could make a report to the authorities, either by way of a Suspicious Activity Report to the NCA, or by a reference to the Trading Standards Department of your local authority, or by contacting the Insolvency Service (who apparently have had previous dealings with these people).
But do ensure that you get your facts right first. Do not confuse Richard Sixsmith and Matthew Richard Sixsmith. Do not suppose that a director's disqualification order prevents a person from legally being in business (as a sole trader or partner, for example). If you are alleging a tax return was completed falsely then be sure (i) who completed it, (ii) who provided the false information on the return, and (iii) that the errors on the return were deliberate & dishonest in your view.
David
Who gives the mortgage reference!
I would expect and hope that these accounts conjurers would sign the "accountants reference" as it they and them alone who should take responsibility for the figures.
01204 = Bolton = in the MML fraud area.
Foot shooting
You have to wonder why people do this anyway. Banks have got a bit over-cautious in recent years, but the intention of these checks is to ensure they can afford to pay the mortgage. What's the point of reporting an inflated income to get a mortgage if your actual income isn't enough for you to keep up payments on it? Living in a really fancy house becomes a lot less fun when it is repossesed.
What do the banks really know about affordability
What's the point of reporting an inflated income to get a mortgage if your actual income isn't enough for you to keep up payments on it?
In this computer generated yes/no decision world who really knows about affordability - you or the bank's software program?
If a sensible person really wants something they may be able to adjust their spending pattern to afford it. Historical information can not show that. Just because the bank turns down the application doesn't mean it is unaffordable or that your home would be repossessed.
We should know as accountants that in a dynamic world historical information is a very blunt tool for predicting the future.
The dangerous assumption
True, but how many of these people over-inflating their incomes are sensible? I take your point though. I had a client that was as near risk-free as you could get when it came to lending money, but the computer still said no. Whilst still wrong, a bit of "massaging" to meet that hurdle by a person who genuinely can cover the mortgage easily is understandable when that sort of thing happens. If a sensible person really wants something they may be able to adjust their spending pattern to afford it.
@B Roberts. I think you are over-interpreting the phrase "dressing-down". I should very much doubt the client was spoken to as if they were a naughty child. If clients are doing something wrong, they need to be told exactly why it is wrong. If what they are doing is foolish, then pointing that out could be considered a "dressing-down", even if presented in a perfectly professional manner.
Mortgage
You have to wonder why people do this anyway. Banks have got a bit over-cautious in recent years, but the intention of these checks is to ensure they can afford to pay the mortgage. What's the point of reporting an inflated income to get a mortgage if your actual income isn't enough for you to keep up payments on it? Living in a really fancy house becomes a lot less fun when it is repossesed.
I've known people who are paying, say, £800 pm in rent and have never missed or been late with a single payment, but can only get offered mortgages with repayments of, say, £500 pm. They can clearly afford a higher mortgage, so maybe understandable (not saying I condone it) if they feel the need to try inflating their income somehow to get a mortgage at a level they feel the bank should be offering.
I've also known of accountants who routinely produced 2 sets of accounts - 1 for the taxman and 1 for the bank manager.
Read, then respond
Since you have repeated pretty much what I have said in a later response, I am assuming you did not read all the way first. If I am mistaken then I apologise, but otherwise it is polite to read all responses before replying to something that has already been subject to change.I've known people who are paying, say, £800 pm in rent and have never missed or been late with a single payment, but can only get offered mortgages with repayments of, say, £500 pm. They can clearly afford a higher mortgage, so maybe understandable (not saying I condone it) if they feel the need to try inflating their income somehow to get a mortgage at a level they feel the bank should be offering.You have to wonder why people do this anyway. Banks have got a bit over-cautious in recent years, but the intention of these checks is to ensure they can afford to pay the mortgage. What's the point of reporting an inflated income to get a mortgage if your actual income isn't enough for you to keep up payments on it? Living in a really fancy house becomes a lot less fun when it is repossesed.
Then you have known accountants that routinely assisted in fraud. Unless a bank requests accounts prepared under different criteria, there is no justification for providing different figures. I've also known of accountants who routinely produced 2 sets of accounts - 1 for the taxman and 1 for the bank manager.
Affordability
I agree with the point made by Andy re: affordability.
Would the Banks accept just one years return as a basis for making a loan over possibly 25 years or more ?
Kent : is this a new client ? - if not, do you not do their tax return ?
Also, I am surprised that you gave a client (customer) a "severe dressing down".
Why are you surprised?
Also, I am surprised that you gave a client (customer) a "severe dressing down".
If you had a client who was proposing to do something dodgy, wouldn't you do the same?
I'm just being nosy, but what would you do in those circumstances?
Surprised
Also, I am surprised that you gave a client (customer) a "severe dressing down".If you had a client who was proposing to do something dodgy, wouldn't you do the same?
I'm just being nosy, but what would you do in those circumstances?
I do not (and never have) worked in practice.
However, under the circumstances described I would explain the situation to the client / customer, and based on their reaction and/or what they actually do I would then decide whether or not I wanted to act for them.
I cannot see that under such circumstances that I would give an adult, who was also a paying customer a "severe dressing down".
It may be my interpretation of the phrase, or the context described, however if I was given a severe dressing down by somebody that I was paying to do a job for me, then it is likely that I would choose to not be a customer for much longer.
"Severe dressing down"
Also, I am surprised that you gave a client (customer) a "severe dressing down".If you had a client who was proposing to do something dodgy, wouldn't you do the same?
I'm just being nosy, but what would you do in those circumstances?
I do not (and never have) worked in practice.
However, under the circumstances described I would explain the situation to the client / customer, and based on their reaction and/or what they actually do I would then decide whether or not I wanted to act for them.
I cannot see that under such circumstances that I would give an adult, who was also a paying customer a "severe dressing down".
It may be my interpretation of the phrase, or the context described, however if I was given a severe dressing down by somebody that I was paying to do a job for me, then it is likely that I would choose to not be a customer for much longer.
The way I read that phrase is that the client was spoken to bluntly and in terms that he could not misinterpret, perhaps using the words "fraud, criminal offence and prison". You may read it in another manner.
Clients ultimately pay us for our knowledge and experience. If they are proposing engaging in mortgage fraud then I think a blunt conversation is necessary.
The fact that the client may no longer want the accountant to act "after being spoken to like that" is largely irrelevant, since committing mortgage fraud would be immediate grounds for disengagement, in my view.
Not tipping off
Tipping off is alerting someone who is being investigated that this is happening. Informing them of your obligations under ML prior to a report therefore cannot be tipping off. Until the report is made, there can be no investigation to put at risk.
I have often given certain of my clients "a bollocking" none of whom have left me. Trouble is it's the same ones all the time
Re Severe dressing down
I think it occurs when the dresser might feel they lack the authority to make the dressee sit up and take notice. That can happen if the dresser feels somehow unsure of themselves or the dressee has an air of supreme confidence. It can also happen if the two parties have known each other a long time and the dresser needs to 'get serious'.
I've caught myself doing it a few times (and I am prone to self-analysis!).
Responsible Lending
With the responsible lending criteria that the banks are using just now, about the only way you can demonstrate you meet the affordability conditions is to be able to demonstrate you don't actually need the money.
This sort of carry on with tax returns is going to become more common so long as lenders seek SA302s rather than any meaningful financial statements and we in the profession may have to try to remain pragmatic about it. Making up returns is clearly unacceptable but what about not claiming AIA in order to inflate taxable profits?
What happens if the client does this, obtains his SA302 and gets the mortgage but amends the return before the January payment deadline?
Apologies
I did see your later response, but as you say it wasn't until after I'd replied to the first one, so apologies for being premature.
Regarding the second point, yes I know that it was fraud (done casually with no fear of repercussions). My intent was not to condone or encourage such activity merely to highlight it. Apologies again if I came across as being supportive of it.
No worries
I didn't really think you were condoning fraud. Just wanted to check since, as is often the case, it is hard to tell for sure when you don't have the visual cues you get from expressions from a face to face conversation.
Dressing down is what I do at the weekends when I don't have to look smart for clients. Probably not tomorrow though, as I am going to see my mother.
Fraud - it depends!
Whether preparing different figures for a lender & the taxman is fraud depends on the detail.
For instance the figures for the lender might sensibly omit non-cash costs such as depreciation. If this is made clear then there is no fraud . . .
David
Dressing down
I gave one of my clients a 'dressing down' this morning. If he decides to go elsewhere I'll shrug, inwardly smile, take it as a sign and move on. If he ignores it and doesn't change his ways I'll be kicking him into touch come his next year-end. And if I win a million on the premium bonds on 1st August I'll be sacking him and the rest by close of play on the 1st and celebrating!
' Severe dressing down' - me too!
Coincidentally I've just written in my blog about a client who has apparently left me 'but only for a year' to gain a mortgage.
He had someone else do his accounts and then had the cheek to ask me to ring HMRC to get SA302's for him.
I wont reiterate what my response was here - no rewrite that - what I shouted at him but see my blog for my rant!
Blog = 'The Final Straw!'
Victim of Deceptive, Though Slightly Amusing, Practices
Very enjoyable blog / rant, Jenny, btw thanks for all your technical blogs - they're far more informative and relevant than CPD days. Have you any CPD plans?
Back to the topic: I had a financial advisor client a few years back who persuaded me to give a mortgage reference for one of his remortgage cases. It went upstream against my better instincts, but he was silver tongued and gave me access to all his client's financials which were passable and so eventually a tenuous reference, full of caveat emptors, ensued.
Fast forward five years, and my financial advisor was no longer in business - the recession had struck - but one of his employees came to me as a (webdesigner) client; he cheerily told me that my reference letter, practice stamp and letterhaed et al, had been rather craftily photocopied and doctored, and subsequently re-used to support countless numbers of remortgage cases. Ouch! And, I suppose, Grrr! Although I have to say, so far as the mortgagers were concerned, more fool you for not having checks or controls in place.