16:20 PM, 30th August 2011, About 10 years ago
Mortgage lenders and the tax man are teaming up to beat fraudsters by checking income claims against tax returns and payroll records.
Banks and building societies can now ask HM Revenue and Customs (HMRC) to verify a borrower’s income by cross-checking loan applications with official income records.
The new move is part of a growing battle against mortgage fraud that costs the industry around £1 billion a year.
The Mortgage Verification Scheme has run as a pilot since the March 2010 Budget between the Council of Mortgage Lenders, the Building Societies Association and HMRC.
The checks are limited to cases where lenders reasonably suspect following their own rigorous checks that mortgage fraud may be taking place.
Mortgage lenders can send mortgage application details electronically to HMRC, where they either have inadequate evidence of declared income or suspect fraud.
HMRC will check the income declared to lenders against information provided in income tax and employment returns. HMRC will then advise lenders whether or not the details correspond to help them assess whether to make a loan offer.
CML director general Paul Smee said: “Lenders have found during the pilot that the scheme has been very useful in helping them to lend responsibly. It has helped them to avoid lending in some cases where there is a risk of fraud, at the same time as giving them confidence about the borrower’s credentials in some cases that they might otherwise have felt compelled to refuse.”
For landlords, failing to declare the correct income could alert the tax man in to launching an inquiry.
Not only do lenders receive verification of income from HMRC under the scheme, but the tax man will cross check the details with tax returns. HMRC has a special unit to deal with mortgage verification inquiries.
Colin Barclay, Assistant Director, HMRC Risk and Intelligence Service, said: “HMRC are determined to tackle fraud wherever we can. The Mortgage Verification Scheme is an unprecedented opportunity for HMRC and lenders to work together to combat fraud in the mortgage industry.”
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