I have often wondered why lenders ask for tax year overviews as they only show tax and not income.
However they also show payments on account due, so a 2018-19 tax year overview has the POAs based on 2017-18 even though no tax return has been submitted. So a borrower could provide this to a lender even if there is no tax or certainly a different amount of tax once the tax return has been submitted.
Unless I am missing something, it doesn’t say if it is based on a submitted tax return. Surely the use of these could mean a borrower could mislead a lender?
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I think the idea is that the tax liability shown on the SA302 (which usually is produced from the accountant's own software) should agree with the HMRC record of tax due as shown by the Tax Year Overview.
Unless things have changed recently, lenders (or brokers) routinely ask for the SA302 and the tax year overview. I have not had a case in recent years where the tax returns (or accounts) are requested. I expect you will shortly get a request from the client for SA302s as well as the TYO!
I agree with John R.
Historically the client had to get an SA302 direct from HMRC. HMRC got fed up providing them, but lenders were reluctant to accept SA302s provided by accountants (or the client) on their own, as it'd be easy enough to mock one up with £millions in earnings to get the loan, but never submit to HMRC. The TYO from HMRC prevents you doing that.
Of course theoretically you could mock up a tax return with £millions in earnings, submit it to HMRC, get the TYO, then submit an amended return with £tens in earnings. However I guess the questions this would likely lead to from HMRC would mean people are unlikely to go to that effort.
I was interested to see that the 2018-19 tax overview did not show whether the figures had been submitted or not.
It is a new client. Clients usually ask me to send the return, even though they have it already.
Why would it? There wouldn't be a tyo if one had not been submitted.
Yes maybe one showing POA due but not one showing a liability which the lender would either assume there's no income or to low to tax.
Make sure that the figures on the (computer produced) SA302 agree EXACTLY to the TYO.
If you have one of those cases where HMRC has missed the Class 2 NIC the only practical thing to do is produce SA302s without the Class 2.
The mortgage companies can't cope with any mis-match between the two documents.
I had another one where the total tax due from our software, which was what we filed, was 2 pence different from HMRC's calculated figure. It caused no end of problems with the lender.
What also gets my back up is lenders mot understanding net profit and sa302 assessable profit.
Example, someone has a large CA claim. Sa302 shows profit after CA, lender lends based on that. In reality profit could be thousands more.
This is because of the irresponsible lack of training of their staff by lenders. Some of the questions I get asked are crazy.
The last one insisted on a fax.
"Print the attachment".
"The form asks for a fax".
"Print the attachment".
No reply.
My mortgage broker told me that the purpose of the TYO was 2-fold; 1) to confirm that the SA302 matched what was filed & 2) to make sure that there was no HMRC debt, incase the loan was going to be used to pay that off.
I had a loan delayed a few years ago because I owed 14p.