Should company accounts for a mortgage be more detailed than those submitted to CH

Should company accounts for a mortgage be more...

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I have been asked to send in 3 years of company accounts for a mortage application.

I have these for the last 3 years which i sent into HMRC and Companies Houes, but in these accounts, my salary is drawn as an overhead, which significantly reduces the company profits.

As the company is small, the costs are not broken down in the official accounts submitted, but I do have a  more detailed balance sheet and PnL. Can I include this in the accounts i send to the mortgage company or do they need to be the exactly as i present them to companies house. obviously the final figures will match.

Also, they have asked for net profit of the company. Again - does this have to be net profit after my salary is counted, or the profit before my salary and dividends are drawn?

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By johngroganjga
02nd Oct 2013 15:10

You should provide the company's full statutory accounts (not the abbreviated version If that is what you filed at Companies House) as a reference point.  Then there is no reason why you should not add a detailed profit and loss account.  The one you must have provided to HMRC should suffice.  However the statutory accounts will disclose the amount of directors' remuneration, so any reader if them will be able to see how much salary has been deducted in arriving at the profit whether you provide them with a detailed profit and los account or not.

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Replying to Ruddles:
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By Euan MacLennan
02nd Oct 2013 15:30

Salary, net profit and dividends

johngroganjga wrote:

However the statutory accounts will disclose the amount of directors' remuneration, so any reader if them will be able to see how much salary has been deducted in arriving at the profit whether you provide them with a detailed profit and los account or not.

It depends on who prepared the statutory accounts - if it was the OP himself, he might not be aware of the full disclosure requirements.

To answer the OP's final question, net profit is after deducting salary, but before dividends, which are paid out of the profits after tax.  Presumably, the lender has specified whether it is the net profit before or after tax which is required.  Mortgage lenders usually now ask for payslips or a P60 to confirm the level of salary and as some of them realise that one-man band companies often pay low salaries and high dividends, they also ask for the net profits after tax as an indication of the maximum income that could be taken in addition to the salary.

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Replying to Wanderer:
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By KH
02nd Oct 2013 15:35

SA302s

Download your income tax calculations from your online SA portal with HMRC ... this calculation is an SA302, even though it doesn't state this fact on the form. This is what you give to your mortgage providers, since it provides a clear breakdown of salaries, dividends, investment income, etc received for that fiscal year. And, since you've paid tax on this little lot, it's deemed to be accurate.

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Replying to Manchester_man:
By johngroganjga
03rd Oct 2013 08:23

Net profit of the company

KH wrote:

Download your income tax calculations from your online SA portal with HMRC ... this calculation is an SA302, even though it doesn't state this fact on the form. This is what you give to your mortgage providers, since it provides a clear breakdown of salaries, dividends, investment income, etc received for that fiscal year. And, since you've paid tax on this little lot, it's deemed to be accurate.

But this would not show the net profit of the company, which is what the lender in this case apparently wants, quite understandably, to know.  The way to provide that to the lander has already been explained above.

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By EOAKS
02nd Oct 2013 18:08

Will the mortgage provider accept 'informal' SA302?

Whenever a clients potential mortgage provider wants a SA 302 we have always asked HMRC to send one. They have obliged but would it be OK to send the calculations as KH suggests - without any HMRC involvement?

 

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By andy.partridge
02nd Oct 2013 22:01

Possibly not
I offered this to my client recently, but his high street bank lender wasn't interested. His view of accountants was obviously similar to my view of bankers.

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By KH
03rd Oct 2013 08:40

SA302s further

To quote HMRC:

 

"Receiving your tax calculation:

HMRC will only send you a paper tax calculation, called form SA302, if:

    1. you sent in a paper tax return before 31 October and asked HMRC to work out your tax, or

    2. you made an amendment to a paper tax return, or

    3. you sent in a tax return but HMRC doesn't agree with your tax calculation

If you do your tax return online, your tax calculation is worked out for you and you can see it on screen or print it.

Sometimes you may be asked for your tax calculation by a bank or other lender as evidence of your income. You don't have to ask HMRC for a paper copy. If you do an online tax return, you can print off your tax calculation yourself. It may not show the form number - SA302."

Certainly I am finding that all my current mortgage applicants require these SA302s, but I never ask HMRC for them, I just print them off the SA online portal for that particular client (and these tax calcs never show the moniker SA302, so I always include the above quote from HMRC for the lenders enlightenment) ... and yes, these SA302s don't show the company's profits, but since mortgage brokers appear to be such nincompoops, not understanding the difference between directors, shareholders, sole traders and partners, let alone that a company's profit all belong to the shareholder(s), then it's these SA302s that seem to do the trick.

The Leeds Building Society, though, appears to be out on a limb of its own, not trusting anybody but those with ICAEW membership ........ .................... is this regulation via the back door?

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By The Innkeeper
03rd Oct 2013 10:09

but remember

if you file using third party software you cannot generate aSA2302 and you must ring up. It takes about two weeks to come through.

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By Mersey
03rd Oct 2013 15:13

thanks everyone

thanks for all of this info

sent in details as above, but things are not looking good as the company made a loss in the 2nd year, even though the company always had capital in reserves and back in profit now - and i have always paid myself the same amount!

back to the drawing board!

 

 

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