Mortgages for PAYE Company directors

jhaysun

Hi all.


Proably a weird one this one.


I'm 50:50 director in a Ltd Co. We've been PAYE for 3+ years now. No divs or salary. Done this as there are great R&D Tax credit advantages. However at Companies Hosue, we have a trading loss for the last 2 or 3 years although a healthy turnover and cashflow.



My question: if I apply for a mortgage as company employee (which technically I am), do I need to declare I'm also a director, or only disclose this if I'm asked?



Cheers all - J

Retired_Mortgage_Adviser

Irrespective of the mechanics of how you are paid, as a 50% shares Director of the company that employs you, most lenders will consider you as self-employed. Any broker/adviser will ask the question so the chance of it not coming out during the fact find or underwriting is little to none.

Just to be clear, this is by no means an uncommon scenario for most whole of market brokers and this is not to say that you will find it difficult to get a mortgage, just that it is unlikely that it will be considered as PAYE employed income.

The crude rule of thumb is - Where the borrower's shareholding in a company is 20%+, treat as self-employed. If not, treat as employed.

jhaysun wrote: »

My question: if I apply for a mortgage as company employee (which technically I am), do I need to declare I'm also a director, or only disclose this if I'm asked?

[Deleted User]

If you are a director of a Ltd company you will probably have payslips with an employee number of 1 or 2 (or at least very low). A decent, vigilant, broker will then check companies house for your employer to see who the directors are. There are also multiple questions about shareholding etc that come out in the application process.

You've got to hope the broker catches this prior to the mortgage underwriters as you may get a record for attempted mortgage fraud if it gets through to them (in addition to the broker getting a black mark and possibly removed as an introducer as not doing enough to combat fraud)

Lenders dont mess around with misrepresentation and fraud. They generally slap the penalties on and rarely stick around for answers. Dont risk it, be completely upfront about your employment situation at all times


Go see a broker and get placed with a lender. You probably wont be on the high street but there are lenders that can unravel accounts and see the profitability of the company beyond accountancy tricks. They just charge for the pleasure of this manual approach


Everyone loves saving tax until its time to apply for a mortgage. I see it every day with self employed folks. Cant have it both ways unfortunately. Either you earn money on paper and you pay the tax but get a mortgage, or you jiggery pokery all your income away and pay less tax but dont have a provable income.

jhaysun

thanks for th info - appreciated!

Retired_Mortgage_Adviser wrote: »

Irrespective of the mechanics of how you are paid, as a 50% shares Director of the company that employs you, most lenders will consider you as self-employed. Any broker/adviser will ask the question so the chance of it not coming out during the fact find or underwriting is little to none.

Just to be clear, this is by no means an uncommon scenario for most whole of market brokers and this is not to say that you will find it difficult to get a mortgage, just that it is unlikely that it will be considered as PAYE employed income.

The crude rule of thumb is - Where the borrower's shareholding in a company is 20%+, treat as self-employed. If not, treat as employed.

Thrugelmir

jhaysun wrote: »

However at Companies Hosue, we have a trading loss for the last 2 or 3 years although a healthy turnover and cashflow.

Turnover is vanity, profit is sanity but cash is always king. With a trading loss the company's finances are far from healthy. Dividends are paid out of profits or retained earnings. Likewise salary costs will simply send the company further into the red. As matters stand there's nothing to support either.

ACG

You are a company director.
2 years SA302s, you may be able to use your latest years PAYE income or an average of the last 2 depending on the lender.

It should not really be an issue though, I would expect you to be fine.