From the 1st September 2011 a new scheme was launched to combat home-loan fraud which will see the taxman getting involved in cases where the bank or building society thinks there is something fishy about the income someone has declared on their mortgage application form.

The scheme called the "mortgage verification scheme" was developed by HMRC, the Council of Mortgage Lenders and the Building Societies Association as an additional tool to combat what is estimated at a £1bn-a-year problem.

For a fee of £14 plus VAT, the system allows lenders to pass on applicants' details to the Revenue. The taxman will then check that what the individual has declared about their income corresponds to the tax and employment information held on its databases. If it doesn't, the borrower could be investigated.

The common view of mortgage lenders appears to be that it will only be used where they reasonably suspect, following their own rigorous checks, that mortgage fraud may be taking place.

Even so, the result is likely to be a greater number of frauds being detected. Under the new Fraud Act 2006, a false representation with the intention to cause loss to another is sufficient for a prosecution. The offence is committed at the point of submitting (for example) fake pay slips or bank statements, regardless of whether the bank or building society subsequently act upon them. Therefore early detection schemes such as this may prevent actual loss to mortgage lenders, but do nothing to decrease the chances of a criminal prosecution following.