Mortgage Verification Scheme gives HMRC leads to under declared income
A new scheme to combat mortgage application fraud was launched on 1 September 2011. A by-product of this is a further source of information for HMRC to use in its risk assessment process.
HMRC, the Council of Mortgage Lenders and the Building Societies Association have worked together on the development of the Mortgage Verification Scheme and see it as an important additional tool to help beat fraud. The National Fraud Authority estimates the cost of mortgage fraud at £1 billion last year, so measures to tackle it are important.
The scheme was announced in the March 2010 Budget and has been refined during a subsequent pilot period. Mortgage lenders will only use the scheme where they suspect mortgage fraud, following their own checks.
Where they have inadequate evidence of declared income and suspect fraud, mortgage lenders will send HMRC relevant details from mortgage applications, using a secure electronic platform. HMRC will cross check the income details declared to lenders against information provided in income tax and employment returns. It will then advise lenders whether or not the details correspond. Lenders will take this into account when making subsequent lending decisions.
However, HMRC is also planning to use this information as part of its own risk assessment process when checking whether the information it has been given on applicants’ tax affairs is correct. We can see that this may lead to some problems ahead and would be interested to hear how it works in practice.
HMRC has set up a specialised unit to deal with these requests. Any mortgage lender who wishes to use the scheme may do so. Other than a fee of £14 plus VAT per case to cover HMRC’s costs, lenders face no additional fees to participate. It is not anticipated that the scheme will have any significant impact on the time taken to reach a lending decision, but it will provide HMRC with another tool in its search for under declared income.