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Our News
24/06/2008
: The reality of current NMD Schemes
This is an extract from a recent forum post and sums up the current situation very well: With regards Money Laundering I appreciate what the Money Laundering rules are there for, but part of this involves Transparency . When a buyer agrees a deal they get a mortgage and state on the mortgage application that the funds used as a deposit are from their own sources - If the deposit is being funded by a third party this is mortgage fraud. With the new money laundering rules solicitors are suppose not just see proof of deposit, but also a trial of the money in the bank account for a sustained period. Some are not doing this and are on a very sticky wicket. CML and Disclosure The lenders position on disclosure is as follows. The buyers solicitor must confirm that the deposit is from the clients own funds and also how the client has raised the funds. If the solicitor is told or suspects that funds are from a discount or a third party he must disclose this to the lender. All the schemes that I have seen are deposit lending whether it is secured on the property being bought, another one or not secured at all. The Buyers I for one would not want to be the clients trying to grow a portfolio this way, building a business with cloak and dagger techniques that could be construed as mortgage fraud and non disclosure of facts to solicitors. The end result you risk the mortgage companies and solicitors refusing to do business with you. The Brokers I certainly would not be in their shoes. Because when the investors get into trouble who do you think they will come after. With the compensation culture within this industry, this is a very dangerous type of scheme to get involved in. With regards tax A vendor CANT just give a cash back with out it being recorded in your accounts somewhere - is it taxable income, a gift or do you off set against purchase price, is it repaying a loan you were given, is it a rebate - etc etc. It has to be recorded somewhere – depending how it is, changes the tax implication. With your scheme, can you let me know how this transaction would be recorded for the Inland Revenue in the investor’s yearly accounts? Say a prop with value £100k they purchase for £85k but buy at the full value of £100k with a cash back / rebate scheme. Would they put the asset value as £85k in their accounts – having just told the land registry they purchased for £100k?
This is an extract from a recent forum post and sums up the current situation very well: With regards Money Laundering I appreciate what the Money Laundering rules are there for, but part of this involves Transparency . When a buyer agrees a deal they get a mortgage and state on the mortgage application that the funds used as a deposit are from their own sources - If the deposit is being funded by a third party this is mortgage fraud. With the new money laundering rules solicitors are suppose not just see proof of deposit, but also a trial of the money in the bank account for a sustained period. Some are not doing this and are on a very sticky wicket. CML and Disclosure The lenders position on disclosure is as follows. The buyers solicitor must confirm that the deposit is from the clients own funds and also how the client has raised the funds. If the solicitor is told or suspects that funds are from a discount or a third party he must disclose this to the lender. All the schemes that I have seen are deposit lending whether it is secured on the property being bought, another one or not secured at all. The Buyers I for one would not want to be the clients trying to grow a portfolio this way, building a business with cloak and dagger techniques that could be construed as mortgage fraud and non disclosure of facts to solicitors. The end result you risk the mortgage companies and solicitors refusing to do business with you. The Brokers I certainly would not be in their shoes. Because when the investors get into trouble who do you think they will come after. With the compensation culture within this industry, this is a very dangerous type of scheme to get involved in. With regards tax A vendor CANT just give a cash back with out it being recorded in your accounts somewhere - is it taxable income, a gift or do you off set against purchase price, is it repaying a loan you were given, is it a rebate - etc etc. It has to be recorded somewhere – depending how it is, changes the tax implication. With your scheme, can you let me know how this transaction would be recorded for the Inland Revenue in the investor’s yearly accounts? Say a prop with value £100k they purchase for £85k but buy at the full value of £100k with a cash back / rebate scheme. Would they put the asset value as £85k in their accounts – having just told the land registry they purchased for £100k?
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