Contractor mortgage lenders start to accept SA302 workarounds

The taxman deleting the staple document that limited company contractors have traditionally needed to get a mortgage has, refreshingly, made lenders more flexible, an IFA reassures.

In fact, lenders are now accepting alternatives to the ‘SA302’ from the directors of limited companies when it comes to assessing income for home loans, says Contractor Financials.

“The documents required do [now] vary between providers,” acknowledged the adviser at the ContractorUK Money Club, referring to HMRC’s cull of SA302 copies from this month.

“But [lenders we work with] are aware of the removal of the SA302, and are working around this issue, meaning that contractors still have the ability to borrow as before the removal.”

'Need to persuade'

The IFA-cum-mortgage broker’s comments will not just reassure PSCs eyeing a mortgage since September 4th (when HMRC canned paper SA302s), it should also please accountants.

Speaking just as HMRC decided to stop producing printed evidence of a person’s income and tax for each year, UHY Hacker Young hinted that one-man bands would be left out in the cold.

“Anyone other than an employee applying for a mortgage will need to…persuade their prospective lender that the new procedure is acceptable”, the accountant said at the time.

The firm was concerned that HMRC striking a deal with the Council of Mortgage Lenders for online account or tax software printouts to be accepted, instead of SA302s, did not apply universally.  

'Self-serve'

This concern remains, although all the names of lenders who do accept ‘self-serve’ tax calculations -- those printed by brokers/accountants -- have now been listed on a .gov page.

Before SA302’s removal, such evidence was typically not sufficient in the eyes of lenders trying to evidence a contractor’s income or gauge their borrowing power.  

Lenders did not (and some still don’t) accept certain qualifications for an accountant, and even faxed copies of SA302s, from HMRC and then via the accountant, were rejected.

Mortgage providers now accepting some accountants’ or online tax software firms’ printouts in absence of SA302s, does not mean that providers have become less strict, however.

'Flexible'

“Lenders haven’t become more relaxed, they’ve [just] become more flexible towards contractors,” Contractor Financials said.

“[The lenders tend to] understand that a limited company which a contractor operates from is an income mechanism, and [they] are happy to work from the value of a contract.”

Or, assuming they still want contractors, PSC owners and others who are not 9-to-5 employees as their customers, they’ve got little choice since HMRC cut paper SA302s.

UHY tax specialist Mike Crelin said: “HMRC no longer have the staff levels or inclination to continue providing this service and appear to make it as difficult as possible to obtain the critical SA302s.”

'Print facility'

However, since its decision, the Revenue says it has spent time working with both members of CML (now Finance UK), and private software firms to “ensure their software offers a print facility.”

“HMRC hasn’t directly communicated to [us] mortgage brokers about [the] changes,” Contractor Financials said. “When we don’t work from the contract, a lender will require a tax year overview and tax calculation. What some lenders will be happy with is either; the company accounts or an accountant’s reference, preventing the need for a SA302.”

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