Time to be clever?..

These are real life issues that I have come across from clients. Names have been changed in order to protect client confidentiality.

[this might be stating the obvious but I have to say it – in no way do I condone any issues of tax evasion – nor would any reputable regulated accountant. Tax avoidance is a different matter and is a perfectly legal way of organising your affairs to minimise your tax bill]


Story 1:

Let’s take a young lady – she needs a reference from an accountant to get a new lease on a rental property. She finds me on AW and emails me accordingly. She either offers to give me cash or a couple of hour’s free service.

Basically she wants to me put my signature to a letter saying that I can confirm she earns whatever she says she does and that I think she is good for the lease.

Do I know her? NO
Do I know her financial affairs? NO
Am I stupid enough to risk serious disciplinary action from my Institute should anything ever go wrong? NO

Whilst I will happily provide mortgage and other references for existing clients (at no cost I must add) – why the hell would I do one for a complete stranger?

Come on folks…. Use some common sense please!!! You are dealing with a professional here not a two bit back street moron.

Story 2:

Jessica has been working for a few years as self employed and doing her own books and tax return. Whether she has been doing it in the most efficient way is a secondary tale to the main story. She hasn’t been totally honest with the nice people at HMRC and has been under declaring her income and just spending the amounts she has missed off of her tax return.

Jessica decides to go buy a house. She lies on the mortgage application about her income. She gets all excited as people do and the process get started.

Mortgage application form duly filed out, survey completed on the house etc.

Before the lender sends out the mortgage offer they do a couple of last minute checks (hey – it’s their money after all and they need to be happy!). One of these involves Jessica proving her declared income – the most logical way is to see copies of her tax returns. Now she panics – she tries to go back and say that she made a mistake on her application, as well as various other feeble excuses which the lender sees through straight away.

Needless to say, the mortgage is refused, her name is put on a black list by the council of mortgage lenders (a shared database amongst the mortgage world) and just to add insult to injury – the lender reports her to HMRC for suspected tax evasion.

Not a happy Jessica to say the least.

Story 3:

Jane has been doing her own books and accounts for the last couple of years (again the same comment about efficiency applies as it did with Jessica).

This time Jane has been under declaring her profit to the tune of around £10k. She has therefore been paying reduced income tax.

What she hasn’t fully realised is how lenders access the borrowing capability of self employed people.

Jane happily walks into the mortgage people and gleefully fills out all the forms thinking she will get a nice big mortgage to help her buy her dream house.

The lender uses a multiple of 3 times the profit figure; Jane hasn’t fully appreciated this and the lender will only offer her a mortgage that is £30k short of what she was expecting.

That nice big house disappears from view and she’s left with the option of either putting down a bigger deposit (which she hasn’t got at present) or settling for something smaller.

Either way – not a happy Jane.