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SAS302 Ethical?

Client wants to show no expenses for higher mortgage

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We have a client who is looking for a first morgage. He is proposing to just show his CIS income and no expenses on his 2021 tax return to get a higher mortgage even though his tax bill will be higher. Surely we can't sign off on this as it won't be a true reflection of his income.  I would welcome subscribers thoughts on this.

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Replying to davidross:
Stepurhan
By stepurhan
14th Apr 2021 10:38

I don't see this as a dumb question, since the OP stated clearly at the start that this surely must be wrong. I would have been worried if they took the opposite position.

We've all had those "am I missing something?" moments though. Since it would benefit the client if there was a legitimate way to do it, I don't think double-checking is out of order. Don't we all want to help our clients if we can?

The discussion has also brought out potentially legitimate amendments to the plan (capital allowance planning, using the trading allowance if not unreasonable) that might achieve a similar result without legal and ethical issues.

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Replying to davidross:
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By I'msorryIhaven'taclue
14th Apr 2021 10:53

davidross wrote:

"0098087" might seem anonymous, but it also says "Lewis and Co" against the picture of a cat - busted?


So the cat's name is Lewis?
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Replying to I'msorryIhaven'taclue:
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By Carole Baldwin
14th Apr 2021 16:08

No, the cat's name is 0098087, could be worse, I had a cat who thought his name was "you little ba**ard" because he scratched me a lot.

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Replying to Carole Baldwin:
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By I'msorryIhaven'taclue
14th Apr 2021 18:12

Is that him on your head?

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Replying to I'msorryIhaven'taclue:
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By Carole Baldwin
15th Apr 2021 10:24

OK - I'm going to change my picture.

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By hyper10
14th Apr 2021 10:00

What I find annoying about these things is, if the person wants to do that, why do they involve others.
It's clearly wrong and a fraud but it seems as if people think that if they get someone else on side, then they are no longer doing anything wrong.

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By jayesh21
14th Apr 2021 10:08

Steer away from this work as it is fraud and reportable. Possible criminal proscecution too and you do not want to be seen asssisting client doing this.

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By Jane31
14th Apr 2021 10:24

I've joined this thread too late I fear.

If, for the purposes of "inflating" a very small second income of a household for the purpose of a mortgage, the taxpayer refused to claim the £1,000 trading allowance (genuinely, there are no allowable expenses to claim), is that fraudulent/deceptive/wrong?

Omitting the claim might make a difference to the tax liability as would take income above the PA.

I don't know if mortgage lenders and brokers are sophisticated enough to look through a trading income allowance and see the true higher level of income or whether they accept only the taxable income on the HMRC calculation.

Edit:
I now see this same point was raised earlier but I can't see an answer.

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Replying to Jane31:
A Putey FACA
By Arthur Putey
14th Apr 2021 11:09

Jane31 wrote:

I don't know if mortgage .....brokers are sophisticated enough ....

I do ....

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Replying to Arthur Putey:
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By Jane31
14th Apr 2021 11:40

I do too actually!

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Replying to Jane31:
By Paul D Utherone
14th Apr 2021 11:34

Jane31 wrote:

I've joined this thread too late I fear.

If, for the purposes of "inflating" a very small second income of a household for the purpose of a mortgage, the taxpayer refused to claim the £1,000 trading allowance (genuinely, there are no allowable expenses to claim), is that fraudulent/deceptive/wrong?

Omitting the claim might make a difference to the tax liability as would take income above the PA.

I don't know if mortgage lenders and brokers are sophisticated enough to look through a trading income allowance and see the true higher level of income or whether they accept only the taxable income on the HMRC calculation.

Edit:
I now see this same point was raised earlier but I can't see an answer.


It all goes to show the ridiculousness of using taxable profits as a basis for determining income levels and ability to pay a mortgage when that could easily give strange & unhelpful results because of an AIA claim, or at a lesser level the Trading allowance in your case.

We might be able to understand and explain the reason for an apparent odd dip in income because of the claim, but for a broker or lender ruled solely by the computers response to figures from an SA302 with no understanding of, or wish to engage with said reasons we end up in this position.

Suppressing expenses to boost taxable profit from the OP leaves the client open to enquiry and difficulties met by Mr Okolo mentioned above, because of an odd blip in tax profit. It is also fraudulent on the lender, worse if having submitted and got the loan based on the SA302, one goes back and amends to claim the omitted expenses.

The Trading Allowance, particularly if in a small part time business where there are no real expenses, but it is still available to claim, is more akin to the personal allowance in that it is just an available deduction with no basis in fact, and just highlight the stupidity of of relying solely on an SA302 for evidence as to ability. That said the effect of claim/no claim is likely to have much lesser bearing on the lenders decision in that case.

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By Nebs
14th Apr 2021 11:19

A client deliberately not claiming all the expenses to which they are entitled is no different to the client who deliberately claims too many expenses to which they are not entitled.

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Replying to Nebs:
A Putey FACA
By Arthur Putey
14th Apr 2021 11:54

Even if they have no intention of applying for a mortgage?

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Replying to Nebs:
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By I'msorryIhaven'taclue
14th Apr 2021 12:37

Nebs wrote:

A client deliberately not claiming all the expenses to which they are entitled is no different to the client who deliberately claims too many expenses to which they are not entitled.


Steady on! Surely one is evasion and the other isn't.

Besides which it's not compulsory to arrange one's affairs so as to minimise tax. Avoiding tax is optional!

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By Arcadia
14th Apr 2021 12:00

What if, playing a long game, the client had for some time not claimed any expenses which they would almost certainly have had to incur? Is it ethical for us to insist he claims them, in case he uses the resulting figures in a mortgage application? I recently applied for a mortgage and as well as salary confirmation the lender wanted 6 months bank statements, presumably to check for a profligate lifestyle. If, again playing the long game, I had suppressed my profligate urges for 6 months in advance, is that a fraudulent application? The whole of the wealth of the UK is based on domestic property purchased by people who couldn't afford the mortgage at the outset. Who are we to prevent people joining this club?

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Replying to Arcadia:
Stepurhan
By stepurhan
14th Apr 2021 13:45

It is ethical for us to refuse to get involved if the client literally asks us to do something fraudulent. If they have hidden it from us as well, it is not our job to actively look for fraud. If a client tells us they have no more claimable expenses, we should take them at their word unless we have very good reason to think otherwise.

As for your other points, it would depend if you made false statements in the application. If you simply provided bank statements, the mortgage company's independent interpretation of them is not your problem. If you have told them that is your typical spending when you know it isn't, that is a different matter.

Though, as I said earlier, I don't see the point. A mortgage that you cannot afford is as bad a deal for you as for the mortgage company. You're not going to be able to keep a house for long if you default on paying it.

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Replying to stepurhan:
A Putey FACA
By Arthur Putey
15th Apr 2021 07:54

And of course, subbies spend theur spare time (when not swearing and/or discussing football/tax avoidance tactics down the pub between the hours of 4-7pm ) doing private cash jobs especially at weekends so are arguably better able to afford the mortgage than "white collar" workers. Factor that into your lending algorithms lenders!

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Replying to Arthur Putey:
Stepurhan
By stepurhan
15th Apr 2021 07:58

But surely all the money from cash jobs goes into the pub later. Which is clearly business expenses because tax "mitigation" tactics are discussed there, so it is a wash. :-)

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By djn
14th Apr 2021 19:20

Could you use the £1000 trading allowance instead of looking at all the expenses?
Just a thought and hmrc give us this option.

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By I'msorryIhaven'taclue
14th Apr 2021 21:50

I suppose the bottom line is whether or not our protagonist is likely to bite off more than he can chew, and if in doing so might just slide into default with his mortgage. Chances are he'll currently be shelling out twice or thrice his proposed mortgage repayments in rent. If he has anything about him - and most have - he'll pay for the roof over his head ahead of everything else.

The true essence of this thread surrounds complicity. And, by extension I suppose, it's also about covering one's derriere by not being party to any "mortgage fraud" (whatever that means - and, let's face it, bending the rules is not a precise science).

Is it (omitting expenses) legal? No problemo! Is it ethical? Ay caramba! Will you be carpeted? Probably not. Bueno!

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By SXGuy
15th Apr 2021 07:40

Exactly how many expenses does this cis subbie have for goodness sake? It can't be much surely.

Are they genuinely leaving out expenses or just not claiming allowances? Big difference I guess.

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