Share this content
0
2115

SA302 and mortgage companies

SA302 and mortgage companies

Didn't find your answer?

Search AccountingWEB

Our client needs a mortgage. 

Accounts are showing a healthy profit which would be more than enough to support the application, but the client bought a van in the year, so the all important SA302 figure will be quite a lot lower than the accounting profit if we claim max AIA, and will take it below the required figure.

We don't have to claim AIA, or could claim part of it, so we could achieve a taxable profit of anywhere between accounts figure and a much reduced figure dependent on our claim for AIA.  I am relatively happy with restricting the AIA claim and have explained to client how CAs will work in future years if we don't claim full AIA this year.  Also, client is aware that the tax bill will be higher this year as a result.

But now client is suggesting we put in a reduced AIA claim, get the SA302 from HMRC for the mortgage and then amend the tax return in a few months time (they are more switched on to tax than I thought!).

There is nothing to stop us from doing this in tax terms, but the ethical side of me is really struggling here and I am not happy.  Part of me thinks it is fair enough given mortgage lenders insistence on using SA302s only which is not realistic (I have checked with the broker and they won't even look at the accounts or accept any explanations form us as to why there has been a decrease in taxable profits versus accounts figure).  The other side of me is worrying about my PI insurance etc if they defaulted on the mortgage and the mortgage co ever found out - but then the accounting profit does support the claim - I am not suggesting anything dodgy in accounting terms. 

What would you do?

Replies

Please login or register to join the discussion.

21st May 2014 14:46

no

I don't know what the legal liability is, but I wouldn't do this. It fails the smell test.

Even if you then tell the lender about the subsequent change, the loan will have been given. You would have participated in a pre-arranged series of steps in order to obtain a larger loan than the lender would otherwise have given.

Thanks (1)
21st May 2014 14:54

Why not just give them the accounts, the tax return and the SA302 so that they can see the diference between the real profit and the taxable profit, and the reasons for it?

Thanks (1)
to lionofludesch
21st May 2014 16:25

Because

johngroganjga wrote:
Why not just give them the accounts, the tax return and the SA302 so that they can see the diference between the real profit and the taxable profit, and the reasons for it?

the banks and building societies are, in my humble opinion, still unfit for purpose. Standards, not a great deal improved, from 2008. Poor training, lack of understanding, of how to understand self-employed/partnership accounts etc, result in these situations.

On some accountant's references, they still ask the question "what percentage is the applicant's shareholding" - in relation to a self-employed individual?

So frustrating and you have to blame the hierarchy. Brewery and passing water, spring to mind.

Thanks (0)
avatar
21st May 2014 15:18

Thanks

Yes Red, it fails the smell test for me too.  I just wondered if I was being overly pedantic and everyone else was merrily resubmitting accounts and I was behind the times.

John, I would love to do that but the mortgage companies apparently are not interested in the accounts any more and can only tick boxes from the SA302.

Thanks (0)
avatar
21st May 2014 15:33

Agree with Red

The sole intention is to engage in a form of deception. The motives are understandable given the inflexibility of lenders, but it's still a NoGo for me.

Thanks (1)
21st May 2014 15:36

Agree

I would agree with those above. As we know, in truth both profit figures are valid, but if they want SA302s then they shall have them - and as we also know, banks/lenders don't understand accounts.

However, it does go to show what a farce this current trend is with lenders using SA302s. As I've explained before to our own friendly mortgage broker, an SA302 is little more than a glorified acknowledgement that a return's been filed.

At some point no doubt, particularly as interest rates edge upwards, some of these chickens might come home to roost.

 

Thanks (1)
avatar
21st May 2014 15:44

@red

I agree with you that there is a very bad odour about this. BUT I might be dreaming or having a senior moment ( or both) that I saw a thread a while ago where this was suggested and then followed through. Perhaps its time for a chokie bikkie

Dreaming again  - if somebody actually did this could a fraud charge stick?

Thanks (0)
21st May 2014 15:57

If I did it .....

..... I'd cover my back with a letter of explanation to the mortgage company.

But lenders aren't as smart as they think.  That's why banks are on the ropes these days.

Thanks (0)
avatar
By thacca
21st May 2014 16:06

Not Sure

Was the first Return misleading? No. He chose not to claim the allowances. A choice the tax systems allows.

Will the second Return be misleading? No. He changed his mind and claimed the allowances. Again a choice the tax systems allows.

If you refuse there is nothing to stop your client amending the return himself or instructing another accountant to do it. He will be within is rights to amend his tax return in the relevant time limits.

This is a tricky one. I'm not sure of the correct answer. But would say it would be a shame to maybe fall out with an otherwise good client over this. Assuming he is an otherwise good client of course.

 

 

 

 

 

 

Thanks (0)
avatar
21st May 2014 16:28

Not quite

thacca wrote:

Was the first Return misleading? No. He chose not to claim the allowances. A choice the tax systems allows.

Will the second Return be misleading? No. He changed his mind and claimed the allowances. Again a choice the tax systems allows.

 

If he is giving taxhound advance notice of changing his mind, it isn't a change of mind at all. It's an intention to deceive. He should have kept quiet.
Thanks (0)
avatar
21st May 2014 16:42

@timeforachange

A long time ago a now nationalised institution asked me for an audited set of accounts for my practice in support of my own morgage application. I did point out that as a member of the ICAEW why on earth should I pay someone else for something that I could do. BTW at the time I was a sole trader
. They did accept the accounts as prepared by me

Thanks (0)
Share this content