Expenses - Must be claimed?

Bulbasaur

Hopefully in the right place but I'm wondering if anyone can give any guidance on whether I must claim all of my expenses whilst self-employed?

I appreciate it may be a strange one but if my income for the year is £11k and I have legit expenses of £4k then do I have to declare them to give me profit of £7k? I wouldn't pay tax but then it won't help me with supporting my partner with a mortgage application. There are £4k of expenses but if I just put through £1k then that will show me having profit of £10k.

I'm not short changing the tax man, but suppose I am looking to make my income seem better for the purposes of a mortgage.

The question is although I can claim expenses, must I claim them?

Thanks so much for any guidance people can give, especially if it links to actual advice.

Keep_pedalling

That would be mortgage fraud, which is a criminal offence.

agrinnall

Keep_pedalling wrote: »

That would be mortgage fraud, which is a criminal offence.

I'm not sure I agree with this, surely there is no requirement to claim expenses, and if they aren't claimed in full then the profit referred to is indeed £10K. Where there might be some doubt is if the expenses are claimed in a subsequent year, but if they're just going to be written off I can't see why it would be a problem.

Pennywise

agrinnall wrote: »

I can't see why it would be a problem.

Doesn't the mortgage application form ask for "business profits"? Not claiming expenses is over-stating profits, not that dissimilar to simply lying to artificially increase income.

There may be some "give" not to claim expenses that are debatable, such as use of home, and other part private/part business expenses etc., but not claiming expenses which are clearly and indisputably business expenses is clearly mortgage fraud in my opinion.

As for trying to claim those expenses in a different year, then, no, that wouldn't be allowable under HMRC rules. There are precedents/cases where expenses claimed in the wrong year have been disallowed.

[Deleted User]

Pennywise wrote: »

Doesn't the mortgage application form ask for "business profits"? Not claiming expenses is over-stating profits, not that dissimilar to simply lying to artificially increase income.

There may be some "give" not to claim expenses that are debatable, such as use of home, and other part private/part business expenses etc., but not claiming expenses which are clearly and indisputably business expenses is clearly mortgage fraud in my opinion.

As for trying to claim those expenses in a different year, then, no, that wouldn't be allowable under HMRC rules. There are precedents/cases where expenses claimed in the wrong year have been disallowed.

Could not agree more. The accounts have to accurately reflect the income and expenditure of the business and one is obliged to confirm exactly that on the self-assessment submission.

Bulbasaur

Thank you all. I definitely don't want to commit mortgage fraud as that scares the heck out of me. I suppose it's just not claiming some of the iffy-er things that you can claim, ie % of elec, heating, mortgage interest when working at home and stuff like that. Full on legitimate expenses such as buying of raw goods, hiring of venues and training courses etc will still be claimed.

It won't be the huge thousands that I outlined in my example at the start.

agrinnall

Don't forget that training courses may not be allowable, it depends on what the training is for.

tebthereb

Whether it is fraud would presumably depend on what you provide to the lender.

If you were to lowball your expenses for your tax return that’s your prerogative obviously at a potential tax cost so HMRC won’t care.

As a matter of fact your “taxable income” and tax return and calculation will then show a lower figure. If the lender requires the taxable income figure or these documents, providing them does not seem like fraud to me although there is a risk of it being considered such.

If they ask you for your accounts or “net income” then I would agree that lowballing expenses is likely to be considered by them as fraudulent.

Of course, whilst the former scenario might not be fraud you should bear in mind that lending criteria is supposedly there as much for your own protection as the lender’s. A lender is likely to give you little leniency if you later struggled to repay and they found out this was due to your expenses being higher than stated on applying and you could risk losing your security - so it’s a pretty big risk to play with the figures and probably not one worth taking in most cases.

TripleH

The other point is whether you expect your income to be consistent in future years, go up or go down.

If your income is likely to go down, it might not be such a great idea to be considered.

trailingspouse

Regardless of the fraud/over-stating profits side of things, if you've got a turnover of £11k and expenses of £4k then you have, in actual fact, only made £7k. So why would you want to 'fudge' things to increase your commitment to a mortgage that the mortgage provider would say you can't afford?

Bulbasaur

Thank you all for your comments once more and for people's warnings.

It's a remortgage on a property of 37% LTV and will move us to a lower monthly fee. We're good for payments currently in fact have been overpaying, but with a change in circumstance it's a bit iffy. Iffy in that, with the start of a new business 8 months ago, we aren't able to sufficiently prove the 2-3 years of accounts that most lenders would like.

I understand that these rules are in place actually to protect us but it's frustrating when we know we'll be fine. In a worst case scenario of business complete failure then we can afford it with partners salary. It's just getting a lender to have that faith in us and for us to avoid going onto current providers SVR argh!

I appreciate all of your time to read and to then provide your comments.