Order & Timing is Critical for Property Sourcers

Apr 21, 2024

Recently we've been supporting more and more property sourcers and deal packagers who have got the order and timing wrong when they set up their businesses. Since setting up they've either received queries from HMRC to confirm some things or they've got fines.

We only find out about this until we receive an email from the sourcing agent saying along the lines of "HMRC Emergency". So, as a matter of urgency we want to get out there the importance of order and timing for property sourcers considering setting up a business (or in the process).

What Do We Mean When We Say 'Order & Timing'

What we are referring to is the initial setup of your sourcing business.

A lot of the time when sourcing agents attend courses, to get the momentum going, the course trainers will tell you to set up your limited company and register it with Companies House and maybe set up a bank account.

However...the problem with that is if you don't have the cash to do everything else immediately after, you've got a problem.

Timing is Key for HMRC

If you leave it a few months, and some people have left it 18 months or 2 years to register with HMRC, they are checking Companies House and issuing fines, if they find there has been a gap between setting up your property sourcing business and registering with HMRC.

The largest fine we have seen issued to a property sourcing business by HMRC for this reason was £1,700.

You Don't Have to Be Trading to Be Fined

Sourcing agents often some to us saying "I'm not trading, I'm still setting up. It doesn't matter that you're not trading.

In the eyes of HMRC, when you set up a property sourcing business you are legally required to have everything in place when you set up your company.

We recently helped a sourcing agent who was inspected by HMRC. After the inspection, the property sourcer received 11 pages of feedback, documenting their failures - including not understand what they needed to be doing day to day whilst sourcing.

HMRC don't care that you don't understand. They will fine you.

You can see the latest list of HMRC fines here for Estate Agents and Property Sourcers (approx. 200 fines issued out in total). These were relating to failure to register business in time for AML Supervision.

Can't Afford to Get All Compliance in Place?

We will continue to say this to everyone who approaches us with this reason for starting sourcing without everything in place.

If you can't afford to do everything, do nothing.

Any by everything we mean:

Registering your sourcing business with ICO and Property Redress Scheme
Insurance (for sourcing agents NOT estate agents)
Legally Required Training - Data Protection and Anti-Money Laundering (AML)
Legally Required Documents
Registration with HMRC

Instead whilst you save, plan what you need and in what order you need it ready for when you can start.

You will putting yourself (and your sourcing business) in a far better position than most who complete a course and get started without the right compliance in place.

If you trade illegally and HMRC find you, there's a huge fine coming your way.

If you think that setting up is expensive (approx. £2k) it's nothing in comparison to what you will get if HMRC catch you trading not knowing what you're doing and not having everything in place.

Not Sure How Much You Need to Spend?

We have created a Compliance Calculator you can use to determine what you have in place already, and what you might need to spend to get your business fully compliant.

Try Our Free Compliance Calculator

Starting Sourcing From Scratch?

We would recommend carrying out as much research as possible before starting your sourcing business. We provide a short online course to help you determine if the costs, time and legal requirements, are for you - before you invest potentially thousands into a business.

The short course is normally £49, however we are offering for £9.99. It takes 2 hours to complete and you'll come away with more of an understand of what's required and expected of sourcing agents to run a successful and professional business.

Introduction to Sourcing - Online Course - £49 £9.99