Refused Mortgage Over And Over

Radicalrooster

Radicalrooster said:

kayleighali said:

Radicalrooster said:

kayleighali said:

Just wanted to clarify something as it's not a situation I have come across before...you say you pay HMRC by DD, where is this sent and how do they know to allocate to your record? Like someone above has said, this would normally be sent to HMRC under and employer PAYE reference (or AO reference for payment) but that wouldn't be the case here and might be a contributory factor in what's going wrong.

Have you checked your Personal Tax Account to see what that shows your status as?

Thanks @kayleighali if I'm honest I don't know the answer to your question.

I hired an accountant that does all this for me, I simply see i my current account a DD to HMRC a few days/a week after being paid.

I tried logging into the HMRC area for Personal tax Account, but after a few tries I can't get in unfortunately. Would my accountant have my status?

Definitely speak to your accountant on this one. The contributions are either going to HMRC with you showing as an employee (in which case there must be an associated PAYE reference number which will assist with the mortgage issue) or as a self-employed person. Knowing how the contributions are being paid to HMRC will help you give the right information to the banks. 

If you look at it from a purely simplistic point of view, you are telling the banks you are an employee but don't have anything concrete to back that up (in their eyes). Your employer should have already set up a PAYE reference number as they are paying someone in the UK, the fact that they are a US company simply means that it is a slightly different type of scheme which is required to ensure they are not liable for employers NI contributions. I'd check with your accountant if this is perhaps what has been done, if not, it should be done as a matter of urgency to ensure your contributions are being allocated to the correct place and it doesn't come back to bite you on the bum further down the line. More info can be found here: https://www.gov.uk/register-employer/y/yes/yes

Thank you @kayleighali this is very worrying and I have contacted my accountant.

I will be very upset if we have lost the house, fees, time and I have been added to the Hunter database all because of their 'recommended' setup of my PAYE and NI.

@kayleighali I've just had a call with my accountants after I emailed them what you said and all they said was 'that's simply not true'.

They said positioning yourself as a full-time employee could mean you would pay more tax anyway so there's no advantage to framing yourself full-time rather than self-employed.

They're adamant I am setup in a legitimate way as they had to speak with HMRC themselves to get this setup and they wouldn't have allowed it should it have not been legitimate.

kayleighali

Radicalrooster said:

Radicalrooster said:

kayleighali said:

Radicalrooster said:

kayleighali said:

Just wanted to clarify something as it's not a situation I have come across before...you say you pay HMRC by DD, where is this sent and how do they know to allocate to your record? Like someone above has said, this would normally be sent to HMRC under and employer PAYE reference (or AO reference for payment) but that wouldn't be the case here and might be a contributory factor in what's going wrong.

Have you checked your Personal Tax Account to see what that shows your status as?

Thanks @kayleighali if I'm honest I don't know the answer to your question.

I hired an accountant that does all this for me, I simply see i my current account a DD to HMRC a few days/a week after being paid.

I tried logging into the HMRC area for Personal tax Account, but after a few tries I can't get in unfortunately. Would my accountant have my status?

Definitely speak to your accountant on this one. The contributions are either going to HMRC with you showing as an employee (in which case there must be an associated PAYE reference number which will assist with the mortgage issue) or as a self-employed person. Knowing how the contributions are being paid to HMRC will help you give the right information to the banks. 

If you look at it from a purely simplistic point of view, you are telling the banks you are an employee but don't have anything concrete to back that up (in their eyes). Your employer should have already set up a PAYE reference number as they are paying someone in the UK, the fact that they are a US company simply means that it is a slightly different type of scheme which is required to ensure they are not liable for employers NI contributions. I'd check with your accountant if this is perhaps what has been done, if not, it should be done as a matter of urgency to ensure your contributions are being allocated to the correct place and it doesn't come back to bite you on the bum further down the line. More info can be found here: https://www.gov.uk/register-employer/y/yes/yes

Thank you @kayleighali this is very worrying and I have contacted my accountant.

I will be very upset if we have lost the house, fees, time and I have been added to the Hunter database all because of their 'recommended' setup of my PAYE and NI.

@kayleighali I've just had a call with my accountants after I emailed them what you said and all they said was 'that's simply not true'.

They said positioning yourself as a full-time employee could mean you would pay more tax anyway so there's no advantage to framing yourself full-time rather than self-employed.

They're adamant I am setup in a legitimate way as they had to speak with HMRC themselves to get this setup and they wouldn't have allowed it should it have not been legitimate.

I'd definitely get them to give you more information, although it may be legitimate it could be that you are set up as self-employed which is causing the issues with your mortgage. The link I gave is from gov.uk and is 100% accurate, if an employer pays someone in the UK then they need a PAYE scheme (albeit a different type from a UK employer) which will ensure the tax and NIC are showing against your record correctly. This could also have an impact if (god forbid) you were ever to lose your job and have to claim benefits - if your NIC payments aren't showing against your tax record correctly then you may not be eligible.

If you wanted to get a bit more information, you can call the Employer's Helpline on 0300 200 3200 and ask for advice. This might help the conversation with your accountant. It definitely appears that the accountant isn't versed in employer issues

kayleighali

Just another thought, it sounds as though the accountant has set you up as self-employed (no difference to the tax paid - same tax free allowances etc, NIC are a different class which could have an impact) but this issue is coming about as the mortgage companies think you are employed. If you are self-employed (in the eyes of the accountant) then you should have a UTR number and may be better applying for a mortgage on the basis of being self-employed as you should have all the information there to back you up

Radicalrooster

kayleighali said:

Just another thought, it sounds as though the accountant has set you up as self-employed (no difference to the tax paid - same tax free allowances etc, NIC are a different class which could have an impact) but this issue is coming about as the mortgage companies think you are employed. If you are self-employed (in the eyes of the accountant) then you should have a UTR number and may be better applying for a mortgage on the basis of being self-employed as you should have all the information there to back you up

Thanks @keyleighali

My accountant said I am on a 'direct payment scheme'. They were very surprised I even brought this up as they said I am on a legitimate scheme for full-time employees.

I do not have a UTR number or as such. As far as I am aware, I am definitely not self-employed.

The only issue with approaching mortgages from a self-employed perspective I am told is I will need 2 years of accounts, which would mean an 18 month wait.

kayleighali

Really? Direct payment schemes were originally set up for disabled people employing carers as they were unable to complete the payroll themselves. They were phased out a few years ago and something else took their place where they were given additional assistance in another way, I can't remember exactly what it was called but it only covered certain criteria. Either way, there would still be a PAYE reference number and your accountant should be submitting payroll information to HMRC every time you are paid.

The simplest way to look at it is that you either need a PAYE reference to prove you are employed or a UTR to prove you are self-employed...very simplistic terms but think of it from a mortgage assessor point of view who probably have quite strict criteria to meet.

Honestly, I would contact the Employer Helpline for a wee bit more advice on what you should be set up as, at least that would put your mind at ease and can point you to the correct legislation to give your accountant. Sorry, I hope I am helping and not just confusing matters even more

MWT

kayleighali said:

Really? Direct payment schemes were originally set up for disabled people employing carers as they were unable to complete the payroll themselves.

That isn't the scheme the accountant is talking about, that was for disabled people receiving 'Direct Payments' and then using the money to pay carers.

This is what the accountant has done...

https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye20100

Cannot say if this is the right choice in this case as it very much depends on the nature of the work, both where and how it is performed.

The presentation of this will have to be done carefully to avoid triggering the wrong response.

There is an employer, but they have no physical presence in the UK, nor are they registered in the UK for tax purposes and you will need to find a lender that is OK with that sort of employment and will not want to treat it as 'self-employed'.

Make sure the brokers understand that you are using a DPNI (Tax and NIC) Scheme and are not employed by a company with any physical presence in the UK.

MWT

Radicalrooster said:

They're adamant I am setup in a legitimate way as they had to speak with HMRC themselves to get this setup and they wouldn't have allowed it should it have not been legitimate.

Just on that point alone, the degree to which any 'advice' given by HMRC is capable of being relied upon is closely limited to exactly what was said to them at the time and always subject to change and reinterpretation as the tax law is changed or evolved through case law, so it is unwise to ever believe that just because it wasn't disallowed, it is therefore legitimate.

kayleighali

MWT said:

kayleighali said:

Really? Direct payment schemes were originally set up for disabled people employing carers as they were unable to complete the payroll themselves.

That isn't the scheme the accountant is talking about, that was for disabled people receiving 'Direct Payments' and then using the money to pay carers.

This is what the accountant has done...

https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye20100

Cannot say if this is the right choice in this case as it very much depends on the nature of the work, both where and how it is performed.

The presentation of this will have to be done carefully to avoid triggering the wrong response.

There is an employer, but they have no physical presence in the UK, nor are they registered in the UK for tax purposes and you will need to find a lender that is OK with that sort of employment and will not want to treat it as 'self-employed'.

Make sure the brokers understand that you are using a DPNI (Tax and NIC) Scheme and are not employed by a company with any physical presence in the UK.

Ahhh right, I knew this one as a 'specialist' scheme, you're better with the lingo than I am

There will still be a PAYE reference and Accounts Office reference to link the employment back to in this case and the information should still flow through to the individual tax record to give a full record of employment which will definitely help with the brokers. 

The only issue you may come up against now is that you appear to only have been working for them for 6 months, not sure how this is viewed or what you were doing before. There would be no harm in asking your accountant to provide payslips showing basic information such as amount paid, tax and NIC deducted (although this is done separately it is still being deducted and paid over), tax code, employer PAYE reference etc, it will certainly back up that you are employed.

MWT

kayleighali said:

...(although this is done separately it is still being deducted and paid over), tax code, employer PAYE reference etc, it will certainly back up that you are employed.

That bit will not be there though as there is no employer registered for PAYE when using this scheme, just the tax and NI liability for the individual.

This is why it gets a bit tricky for the broker when keying this in I would suspect.

Similarly the borrowers bank statements will look like self-employed with the direct HMRC payments.

I'm sure ti is possible though, just needs to be done right and cleared with the lender first, perhaps one of the brokers who post here can add a little clarity on that subject..?

Radicalrooster

Thank you everyone, especially @kayleighali and @mwt for your recent comments.

UPDATE: After speaking with my accountants, they put me in touch with another (fifth!) broker who they say they recommend to people in my situation.

I spoke with him today and he basically said any traditional high street lender is definitely not an option. He deals exclusively with overseas and complex set ups like mine. He said the best option would be a building society as they are much more manual rather than a 'checkbox' system of a bank

What he did mention was, that while I am employed in this way, I will always have problems trying to get a mortgage.

One thing he did note was - He thought it was funny I didn't have to do a US tax return? As I am not a US resident, I didn't believe I would ever have to do one and my accountant hasn't advised otherwise? The first I have heard of it...

Either way, I believe the house that took us three months to find will sadly fall through this week/next.

I do feel really bad for the sellers - It was a simple chain and they were simply buying another property. It has been a very quick process (we're only 8 weeks in) but I am going to feel terrible saying we're going to have to pull out.