Audited Accounts for Mortgage Broker

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simp

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Hi:-

I'm a sole trader about to apply for a mortgage, and I'm just preparing my last 3 years' audited accounts, with the help of my accountant.
Over the past 3 years, I have crammed my expenses with everything I could get away with, for tax purposes I work in the media, so a lot of day-to-day expenses are just about justifiable - CDs, DVDs, rent, late-night taxis, etc.
But looking at my accounts again, with an eye for the profit line, I'm seeing the profit sapped by these expenses.
Should I run through my accounts, and weed out all the borderline expenses, for the sake of the profit margin? There may be tax implications, but I'd rather have a healthy set of accounts, and settle with Mr. Revenue, than get mortgage approval for a tiny amount... Or will the financial institutions read between the lines and factor in all the borderline expenses which clog up such accounts?
Thanks in advance for your advice!

simp.
 
If they really are valid expenses and you are not making healthy profits then you need to look at the business you are in. Paying more tax than you need to in order to get a bigger mortgage makes no sense.
 
On the other hand if your accounts are (to use your own words) clogged with "borderline expenses" then you should note that this is likely to cause queries and problems in the event of any future Revenue audit of your business. If you are borrowing heavily for other purposes at the moment, you could find yourself in grave difficulties if tax liabilities arise on foot of an audit.
 
Hi guys - just to clarify...
I'm essentially a consultant, so I have no real overheads to speak of - which are not already also my day-to-day personal expenses.
All my expenses are spent on me, and are business expenses, insofar as I'm in business. If I get a taxi, or buy a book, these are arguably business expenses, so I've been including them as such, as, in this case, they make me more mobile and better informed, respectively.
I could just say that these were personal expenses, since they also help me personally - but the line is somewhat blurred.
For the purposes of revenue assessments, I've interpreted the distinction loosely; but for the purposes of mortgage assessment, I'm not so sure...
Also, as far as tax assessment goes, approx 40% of all my income is exempt as it's creative work - so my tax liability has always been small to begin with.
The mortgage broker has advised me not to revise the figures, but I'm just wondering what everyone else thinks!
I have no debts, have no reall overheads, business is just fine - I'm just trying to get the figures down on paper which will help me to get a modest loan, and not seem like some kind of broke leper.
Your thoughts, as ever, are welcome.
 
If I get a taxi, or buy a book, these are arguably business expenses, so I've been including them as such, as, in this case, they make me more mobile and better informed, respectively.
Click to expand...
The rules in this State's taxes legislation regarding what are and are not allowable business expenses are a lot more strict that this interpretation. For your own sake, you really need to discuss with your accountant the concerns you have expressed above.
 
Thanks for that, Ubiquitous. I've read the relevant revenue guidelines many times, and I still find them a little ambiguous. I should probably have another chat with my accountant about this.
[http://www.revenue.ie/services/bus_start2.htm]

But my main concern is simply that my accounts are going to look pale and uninteresting to the mortgage assessment people - and I'm wracking my brains to come up with ways to give them a healthy glow.
My main question still being - will they factor in some of my revenue expenditure when analysing my figures?
 
The short answer is yes. Lenders will look at your accounts and may well factor back in items such as "home use as office" and the like. Just make sure you highlight these to your broker so that he/she can do likewise with the lender.

Sarah

www.rea.ie
 
Thanks Sarah. I will be sure to talk my broker through the accounts first. It's all there, it just needs a little illumination...
 
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