Mortgage Rejected Because I do not have expenses

strongeo

I applied with my partner for a mortgage (£116,375) and have all the relevant documentation requested by the bank at initial phase of application, I'm self-employed and my partner works full-time our joint income is £45,000.

I have 21 months worth of accounts supporting this (they were happy with this along with a projection for this financial year) and this has all been signed off by my accountant.

The mortgage was referred to the underwriter straight away (I did expect this).

I currently work from my parents home and incur no expenses due to the nature of the business all my work is on a personal computer, I work on a long term basis with several clients.

My accountants showed that all income ended up as net profit, no expenses declared on my tax returns either, firstly the underwriter came back with a request for fully certified accounts for the 21 months, I had provided two tax returns in addition to a letter from my accountant confirming income over this period which I and my accountant assumed would be enough.

The underwriter seemingly wants 'full draft accounts' for my business. Which I have no idea how to provide, all income is run through my personal current account which they have access to and can see incoming payments match those given in my accounts summary.

To me they are being vague and unhelpful about exactly what they want to see, my accountant said he had never encountered any problems with the documentation format for mortgages before.

Another issue was that the underwriter was unsure about the business solidity "because most businesses fail in their first 3 years" (I had provided evidence of future work over the next 6 months one contract worth £9,500 over a 6 month time period in addition to letters supporting long term working relationships with reputable companies within the UK).

Lastly the underwriter said they wanted to see evidence of expenses as "all businesses have some overheads or expenses" - and if I could not provide accounts with expenses they could not proceed. I can't really change my tax returns and lie about expenses that I have not incurred can I?

Has anyone had this kind of problem before, I'm considering appealing the decision but I have been totally transparent and they still want more documentation which does not exist.

Any suggestions guys?

Cheers

opinions4u

A good accountant would ensure that business expenses are identified and claimed against tax.

Computer equipment owned by the business. Telephone calls made the business. Postal expenses. Driving to and from meetings with clients. Paper for the printer. Software purchased to maintain the business.

I know we live in an eWorld these days, but I'd be very cautious if I was being asked to lend against business accounts that seem to have no costs.

Is there another set of books for HMRC?

strongeo

Computer equipment as I said is personal and was mine long before I started as self employed. Telephone calls are zero, no postal costs. I dont drive. I dont use a printer. Software used was paid for as a student before I became self employed. I can literally think of nothing I will incur as a cost until I find my own property, as then I will be paying Utility bills.

No seperate books for HMRC. My accounts show all income from December 2009, all as net profit. (2010/2011 Tax year - £27,000). And accountants projection for this financial year is £30,000 which I will be set to match in 3-4 months.

Meeper

When you started to use the computer for business, it entered business use and has a value and thus a depreciation expense. Internet cost is an expense. Utilising a room in your house as an office is an expense.

Which lender are you using, and who do you bank with?

strongeo

Meeper wrote: »

When you started to use the computer for business, it entered business use and has a value and thus a depreciation expense. Internet cost is an expense. Utilising a room in your house as an office is an expense.

Which lender are you using, and who do you bank with?

Apart from the depreciation, none of those things are true expenses as I live with my parents and pay no utility/rent.

Its with Ulster Bank (RBS), whom I also bank with.

In addition, I have already submitted returns for the year in question, so cannot modify to add the depreciation of the use of a computer.

Thrugelmir

strongeo wrote: »

Apart from the depreciation, none of those things are true expenses as I live with my parents and pay no utility/rent.

So you never meet your clients or talk them except via email?

What is the nature of your business?

Meeper

Make them "true expenses" to reduce your profit and pay less tax, silly.

GMS

strongeo wrote: »

Apart from the depreciation, none of those things are true expenses as I live with my parents and pay no utility/rent.

Its with Ulster Bank (RBS), whom I also bank with.

In addition, I have already submitted returns for the year in question, so cannot modify to add the depreciation of the use of a computer.

Your accountant should have submitted your returns for you in a manner which would mean you don't need to amend them.

strongeo

Thrugelmir wrote: »

So you never meet your clients or talk them except via email?

What is the nature of your business?

No, I'm a web developer. All correspondance is through email and instant messaging.

strongeo

GMS wrote: »

Your accountant should have submitted your returns for you in a manner which would mean you don't need to amend them.

I don't want or need to amend them. They are a true reflection of my accounts and business. I was merely pointing out that telling me X or Y could be listed as an expense is irrelevant.

Meeper

You must have bought particular software and such to be able to do that business. All allowable expenses. A new keyboard, mouse, monitor, anything. All expenses.