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HMRC checks could cause problems for self-employed

A specialist mortgage broker has warned that self-employed and contract workers may encounter problems when applying for a mortgage directly, as a result of the mortgage verification scheme.

The scheme was launched last September by HM Revenue & Customs, the Council of Mortgage Lenders and the Building Societies Association to tackle fraud. If a mortgage lender suspects an applicant of supplying a false income, they can cross reference it with HMRC for a £14 fee.

HMRC will check applicants’ income details against their income tax and employment returns.

But Tony Harris, managing director of ContractorMoney, which works on behalf of short-term contract workers and self-employed people, says that if borrowers have put their gross contract rate on an application with a lender, it will not tally with HMRC figures.

The HMRC figure is likely to be different because the applicant will not pay personal tax on such job-related spends as accountant fees.

Harris says: “I foresee problems where borrowers go to a lender direct because they won’t always have the knowledge to present their case in the best light, which in turn will make the underwriters more inclined to consult HMRC under this verification initiative.”

He says brokers can ensure that the application goes to a key individual at the lender with whom they have already discussed the particulars of the case.

But a spokesman for the CML says: “If people report the same figure to HMRC as they report to the lender the scheme should not create any problems for them.”

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