Mortgage/Rental - major issues proving income/employment.
Mortgage/Rental - major issues proving income/employment.
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Discussion

BladeMonster

Original Poster:

51 posts

168 months

Saturday 3rd September 2011
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Hope this is in the right place. Two friends of mine are in their current notice period of their tenancy and had found somewhere else but it fell through after the LL found their own tenant. They now have only a few weeks to find somewhere to live, process an application and move.

The issue I am trying to help them with is that they recently both moved over to some kind of contractor payroll solution which is outside the UK (for tax purposes I believe) and this now leaves them with no proof of UK employment/income and also both are currently out of contract having been travelling for part of the summer (although they would normally go straight back onto contracts after a spell away, which is what they intend to do straight after moving house).

They had employment references for last tenancy but since moving to the offshore tax thing it seems they now have no way to prove income/employment references. How would they get around this with a Lettings Agent, all of whom I would suspect would require employment references/accounts? I understand there is a box on the property rental application forms called "independent means" - would they be able to use this and simply pay for a tenancy in one lump sum? From what I gather, this would be financially possible as they do both have fairly decent savings pots.

The bank also had issues with this contractor payroll thing when they tried recently to get a mortgage together, even though they had a substantial deposit. They are saying the bank said something about checking income with the taxman and that because they pay tax outside the UK, on paper their earnings are small, to reduce tax burden, but in reality they are substantial earnings, I believe 100k-150k, with ability to overpay a mortgage considerably. I don't know the ins and outs of the tax scheme, only that it was recently on the radar of the taxman and has since been superceded by a new scheme (but contractors are not being pursued for back tax as the scheme was compliant with something or other).

Any informal advice would be great to pass on, as I can't see how it can be possible for them to be earning at this level but struggling so much to get a mortgage or even just rent a property (and is it possible to rent and pay in one lump sum as I and others are suggesting and if so, are there any pitfalls in doing this?) Oh, I suppose it would also be useful to ask if anyone knows of any contractor plans or processes that could enable them to revert back to UK tax but without going PAYE or getting hammered? I think they used Limited companies or "umbrellas" at one time but some regulation or other caused some issues (sorry, I don't have full detail but could ask if it helps).

Many thanks for any advice.

Steffan

10,362 posts

244 months

Saturday 3rd September 2011
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I suggest your friends seek advice from a local IFA. Mortgages are no longer simple to procure. Self certification is dead. Your friends need professional help.

BladeMonster

Original Poster:

51 posts

168 months

Saturday 3rd September 2011
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Hi Steffan, thanks, yes I believe the bank said something similar regarding mortgages and that they had no chance even with big deposit and overpaying ability, but the immediate predicament is their rental applications issue, this is urgent for them now and concerning for them.

Steffan

10,362 posts

244 months

Saturday 3rd September 2011
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Try EricM he may well be able to assist them with their difficulty.

996c2

470 posts

181 months

Saturday 3rd September 2011
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As a landlord I would be happy to accept someone who is able to pay 6-12 months in advance regardless of their ability to prove their income.

However, i think the mortgage company will have a different view as their exposure is for 25years!

BladeMonster

Original Poster:

51 posts

168 months

Saturday 3rd September 2011
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Hi 996 - I would too, but I think the issue is the rental agencies are being ultra over the top on paperwork, apparently they are even asking potential tenants for personal references on top of previous landlord/agency references, employment, etc!

mph1977

12,467 posts

184 months

Sunday 4th September 2011
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oh dear , 'self employed' 'contractors' coming up against you can't have you cake and eat it

  • very small violin plays* ...

BladeMonster

Original Poster:

51 posts

168 months

Sunday 4th September 2011
quotequote all
Hi, whilst I see what you are saying, these people are my good friends and have been decent and kind people when I needed them and are just in general all round nice human beings, so I would appreciate constructive advice, not sniping. They only went into contracting anyway after both enduring multiple redundancies - it was that or literally the dole at one point. They are simply trying to survive and keep a roof over their heads - this situation is urgent and I need solutions to help them, not criticism. One of them has also had a tough, tough battle with recurrent cancer for a long time on and off but it keeps coming back and the outlook is not good (hence why they went travelling over the summer) which to be fair I think many people would also do if they were told "enjoy what time you have together as we are running out of options".

Please, save the nasty comments for elsewhere, this really is not the time or place. I simply need advice on what needs doing to get them into a rental property for 6 months and if I or other friends or family need to pay for professional advice then that we will do. True friends don't turn their back on each other in tough times. They have the offer of several sofas but in their situation they really need their own space and comfort, plus need to be in their same PCT area to stay with same long-term medical team.

groak

3,254 posts

195 months

Sunday 4th September 2011
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If they were looking for a let from MY agency I'd take them on in a heartbeat. They'd need an admin fee, a deposit and a month's rent in advance.

There's a really weird letting scenario going on in the UK just now. Despite all having 30 years experience, being award winners and being members of all kinds of accredited residential letting agent associations, most of these shysters didn't exist 5 years ago. Their awards are basically shams, their 30 years experience is lies and the accredited organisations they belong to are almost as fakey and certainly as useless as they are.

There's almost certainly a real letting agent somewhere around where you live. Take them there. And if they try to fukk that real letting agent over, trust me they'll find out what fukking over really is before you can say 'tenants rights'.




grantone

642 posts

189 months

Sunday 4th September 2011
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A few years ago, after coming back from travelling, my paperwork didn't tick all the boxes the letting agent had, so I paid 6 months upfront and then reverted to monthly payments. They indicated that while not common, it was something they'd arranged a few times before. The remote risk I saw was that if the landlord went bust in that period the money was gone.

Your friends sound cash rich, so a reasonable risk to accept in exchange for not needing to alter their income arrangement?

BladeMonster

Original Poster:

51 posts

168 months

Sunday 4th September 2011
quotequote all
groak said:
If they were looking for a let from MY agency I'd take them on in a heartbeat. They'd need an admin fee, a deposit and a month's rent in advance.

There's a really weird letting scenario going on in the UK just now. Despite all having 30 years experience, being award winners and being members of all kinds of accredited residential letting agent associations, most of these shysters didn't exist 5 years ago. Their awards are basically shams, their 30 years experience is lies and the accredited organisations they belong to are almost as fakey and certainly as useless as they are.

There's almost certainly a real letting agent somewhere around where you live. Take them there. And if they try to fukk that real letting agent over, trust me they'll find out what fukking over really is before you can say 'tenants rights'.

Thanks mate, very decent of you to say so! It always seems to be the people that can pay their way and not massively overstretched that have to jump through hoops. They have the means to pay upfront in full, just not all the reams of paperwork being requested. No way would they be into anything dodge, they have great reference from current agent, ie rent paid on time always, place kept spotless etc etc.

Is it really that bad in lettings now? How do they get away with it? How would I go about telling a decent one apart from a crook? I don't want to send them to someone that will rob their application fee and leave them high and dry!

I somehow imagined that letting agents would be regulated or is this simply not the case? (Been a while since I shared grubby student digs, sounds worse if anything now, not better!)

surfymark

895 posts

247 months

Sunday 4th September 2011
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For rental, I would try to seek out an independent Landlord. Try Gumtree or even possibly eBay or the local newspaper ads. As others have said, I personally would be happy to take on someone who paid 6 months in advance but didn't have any current income.

A lot of Landlords like me have been Contractors before and know the score.

In terms of Mortgages, this is more tricky but gets easier the more deposit you have to put down. I would get in touch with these guys: http://www.contractormortgagesuk.com/or these ones: http://www.contractorfinancials.com/ both of whom have good schemes to help people in your friend's situation. I would say though that they will probably need to be in work and be able to prove 3 - 6 months further work after the completion date. So they would need to find their next contracts first really.

HTH
M

BladeMonster

Original Poster:

51 posts

168 months

Sunday 4th September 2011
quotequote all
grantone said:
A few years ago, after coming back from travelling, my paperwork didn't tick all the boxes the letting agent had, so I paid 6 months upfront and then reverted to monthly payments. They indicated that while not common, it was something they'd arranged a few times before. The remote risk I saw was that if the landlord went bust in that period the money was gone.

Your friends sound cash rich, so a reasonable risk to accept in exchange for not needing to alter their income arrangement?
Hi, that sounds straightforward, perhaps they just need to find a decent agent, they are saying the application forms want chapter and verse on finances, including guarantees about rental amount being less than 2.5 or 3.5 (?) salary? Sorry can't recall exact detail, but thought it sounded very odd for rentals, for people that want to pay full thing in advance, ie why would income multiple be an issue? It all sounds dubious to me - surely if it were all this stringent, lots of people would have issues with letting agents/be unable to pass "criteria".

Eric Mc

124,066 posts

281 months

Sunday 4th September 2011
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It's the old dilemma, isn't it -

hide your income from the tax man but then find you have shot yourself in the foot when trying to prove your income to a lender.

To be honest, I have little sympathy for people who get caught out like this.

I am currently dealing with THREE cases of this nature. Two will be fine because everything those clients have done is obvious and above board. One will be more problematic because they have not been as forthright with their income details in the past and are now struggling to prove this information.

BladeMonster

Original Poster:

51 posts

168 months

Sunday 4th September 2011
quotequote all
Eric Mc said:
It's the old dilemma, isn't it -

hide your income from the tax man but then find you have shot yourself in the foot when trying to prove your income to a lender.

To be honest, I have little sympathy for people who get caught out like this.

I am currently dealing with THREE cases of this nature. Two will be fine because everything those clients have done is obvious and above board. One will be more problematic because they have not been as forthright with their income details in the past and are now struggling to prove this information.
Eric

With respect - no one is "caught out" as you put it. My friends went contracting simply to stay in work after multiple redundancies and my friend's partner having had recurring cancer for nearly a decade on and off. Who do you think would offer someone a permanent job again in those kind of circumstances? Have you ever tried to find work and keep a roof over your head after spending nearly your entire twenties fighting for your life and being battered by repeated rounds of brutal chemo and major surgeries, with still no end in sight in your early thirties?

Most blokes wouldn't be even trying to look for work in his shoes believe me, but fair play to him/his Mrs, they didn't sit on their backsides and claim a free ride and every benefit going, they went back to work, in the only practical way they could. Not everyone is a shyster. They did not go contracting to scam the taxman, they chose contract as no permanent employer would touch him with that medical history and she couldn't earn enough alone to pay both their way, especially with the big gaps off work caring for him during treatment. They followed their Accountant to the letter - not their fault he turned out to be a tw4t of the highest order. Before casting stones, ask yourself can you even understand being kicked when you're down, over and over, for years and years. Would you not do everything to keep working, any way possible? I doubt most could cope, let alone want to work and pay their way in society.

This is not helpful - my friends are facing homelessness here and are near suicidal already with the current prognosis and what lies ahead. They are desperate and in a terrible spot (through no fault of their own and a dreadful set of circumstances).

Please - if you can't help, park the vitriol, it isn't helping. I need to find them a rental solution, for now, pending more treatment, not debate the mechanics of self-employment.

Thank you so much to those who have helped so far.

Edited by BladeMonster on Sunday 4th September 11:24

Eric Mc

124,066 posts

281 months

Sunday 4th September 2011
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Of course there will be specific circumstances which will make particular cases easy or difficult for lenders to assess. Are you saying that they were MADE adopt on off shore solution in order to get work?

In other words, they didn't make informed decisions themselves as to how they were going to be paid?

In a normal contracting/personal limited company/umbrella company types situation, there should be no real dificulty in explaining how income is earned and paid to the applicants. It looks to me like they have a more complicated situation which a third party finds difficult to assess.

But as I said earlier, people are often keen to adopt a particular strategy in order to minimise their tax liabilities but then find that this very strategy works against them when they need to borrow or prove income levels to a third party.

BladeMonster

Original Poster:

51 posts

168 months

Sunday 4th September 2011
quotequote all
Eric Mc said:
It looks to me like they have a more complicated situation which a third party finds difficult to assess.
How dreadfully observant.

Nice easy vehicles with cash left sitting in Ltd. Companies to mature then shutting said company to dodge tax is no better, especially when your life doesn't fit into little tickboxes and when the difference between living and dying, is funding your own healthcare. When you have waited 2 months for diagnostic scans whilst inoperable tumours grow and spread and rapid private funds is the only thing that will get ANY treatment rolling, then come back and critique how others legally pay themselves.

Somehow faced with the same, I don't think you'd be waiting around to avoid extra tax on Ltd. Pay structure and casually letting your "dividends" mature, rather than paying for scans/tests as and when needed, whilst petty rows go on in the background about funding. For all the criticisms, some pay structures just work in the way needed when desperate and fast access to earnings is needed, without a big song and dance about which tax reduction practice is most legitimate and with flexibility of suddenly needing another six month stint in hospital. You speak as if everyone is on the rob, my friends did nothing wrong, nor unlawful, so your misplaced grudge towards contractors doing what is perfectly valid is pointless. I'm quite sure if you were lying in hspital for months at a time, being chopped open and a fraction from the jaws of every infection going, the last thing you'd be doing is debating the finer intracies of which legal tax solution is most accepted/reviled by those who take issue with contractors. Some people have to make quick, dirty decisions and don't have the luxuries of time/wellness that we take for granted. It is worrying that you can't see this and take such a "one size fits all" view. You just haven't a clue at all about life on the other side, where waking up after a one-off experimental surgery is your biggest concern, let alone poring over crooked Accountant's fiasco dealings nor putting right poor advice/decisions. All very simple to condemn over a keyboard but I have seen real strength and grit and this sure isn't it.

No doubt if my friends *lawfully* gave up work totally and claimed what they are lawfully entitled to and indeed what the welfare state was created for, they'd be villified as workshy scroungers too. Damned if they do, damned if they don't. Allths bitterness about contractors is misplaced - blame the game, not the player. PAYEs taking on obscene loans they can't afford are no better. Anyway, immaterial debate here and wrong place for it.

Compassion is clearly in short supply - I seriously, seriously hope you never, ever have to experience even a fraction of the decade that has sent my friends to hell and back. I really mean that - I feel sorry that your schadenfraude like views stop you feeling any empathy for the plight of fellow mankind. It is a bit unbelievable really, that almost gleeful mentality- however money and obsessing over it is not the be all and end all.

Now, if you can't help my cancer patient friend and his partner to get a rental roof over their head for 6 months, whilst they pray for a miracle with treatment, don't bother replying - this is just wasting everyone's time and grossly tactless behaviour to boot. Frankly some people are just happy to still be here, let alone running their affairs in the most "efficient" manner.

Eric Mc

124,066 posts

281 months

Sunday 4th September 2011
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So, what was their logic then?

BladeMonster

Original Poster:

51 posts

168 months

Sunday 4th September 2011
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Eric Mc said:
So, what was their logic then?
Well, it should be simple!

Even when they wanted to use a Ltd. Company, the agency that got them the contracts prohibited it, saying they would only get the work if they used a payroll solution. In fact, if I am not mistaken, the payroll company was introduced through the agency I think, with an independent accountant signing it off. It would have been fine for someone not dealing with severe issues and not able to maintain full time work/better mortgage options for more stable, "settled" persons able to work FT long term.

Can you help with advice on rental property side or not?

darreni

4,223 posts

286 months

Sunday 4th September 2011
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As they have a decent savings pot, offer a years rent up front? Money talks etc.
Unless i'm missing something, problem solved.