I've bu**ered something up and need help/advice re Mortgage application.

It’s in relation to clients who are making a mortgage application.

At the end of July they asked me for income for a mortgage application, so I went back through their last two completed tax returns and got details for 2010/2011 fine. I then accidentally took details from accounts for 2012 (I'll say £30,000 split between them), which is where I went wrong as I should have taken the August 2011 figure (say £10,000) which is the one for the April 2012 tax return. This is a huge difference of £20,000 which is going to have an impact on their mortgage.

One of the most significant aspects is that they were in partnership, then ltd co for 18 months trading then partnership for 6 months , which has skewed their figures for three years, as they’ve only got 2 ½ years income showing in the three tax years!

I realised this week whilst working on their tax returns that I made a mistake and have come home to a message saying they’ve found a house. Panic.

Their year end to 31 August has now lapsed and I want to get this years figures sorted out to see what can be done to A) help rectify my error in the eyes of the client and B) improve their mortgage application. I’ve only ever done one mortgage letter before and I don't want to **** anything else up for the client.

I don’t think it’s unreasonable to factor figures for September 2011 – March 2012 (7/12ths of the last year trading) into the figures for the mortgage company, as this was income during the three years, although it won’t be shown on the tax return. P&L at the moment unadjusted to 1 August 2012 shows a profit of, say, £60,000 so 7/12ths would help significantly.

I have asked them for the records to get the accounts prepared, but is is reasonable to apportion 7 months into the calculations?

Will the mortgage co get funny/difficult?

Any advice/experience to share?:001_wub:
FMAAT - AAT Licensed Member in Practice - Pewsey, Wiltshire

Comments

  • groundy
    groundy Registered Posts: 495
    Mortgage companies these days will always ask for SA302 and therefore figures passed to them have to agree to whats on tax returns. Not sure of how to help on this one sorry
  • Monsoon
    Monsoon FMAAT, AAT Licensed Accountant Posts: 4,071 ? ? ?
    Is the basis period a standard financial year i.e. to 31 Mar / 5 April?

    Or is it different?

    You mention 31 August - is that the partnership y/e or the old Ltd Co?
  • anniem
    anniem Registered Posts: 1,326
    The period is from February 2011 - 31 August 2011, so I think I'm going to suggest we change the year end to 31 March, which will another 7 months into the accounts and then prepare acccounts/Tax Returns to the new year end. The mortgage company want HMRC Form SA302 to prove the figures and I think this is the only thing I can do.
    FMAAT - AAT Licensed Member in Practice - Pewsey, Wiltshire
  • anniem
    anniem Registered Posts: 1,326
    Update; client happily placated. We're changing year end to 31 January and producing accounts/tax returns to the new date.

    It was a case of balancing the mortgage requirement against the tax implications and payments due in January/July 2013.

    August 2011 produced too little income for mortgage and practically zero tax liability.
    January 2012 produced acceptable income for mortgage requirement and reasonably substantial tax liability.
    March 2012 produced too much income for mortgage requirement and much higher tax liability for 2013.

    Now need to produce more accounts and file tax returns pdq for SA302's to be produced by HMRC. Thank goodness for online filing.
    FMAAT - AAT Licensed Member in Practice - Pewsey, Wiltshire
  • Monsoon
    Monsoon FMAAT, AAT Licensed Accountant Posts: 4,071 ? ? ?
    Glad you'd got it sorted honey :D

    Don't you just hate panics like that?!

    I had one earlier, someone said "I can't see last year's loss on the tax comp" and I had kittens thinking I'd not claimed a £14k loss against the next year's profit! This being a 2011 return filed ages ago...

    Luckily it was on the CT600, just doesn't show up on the ixbrl comps, but I had a bit of a panic moment!
Privacy Policy