News & events
16/08/2012 - Record keeping
How long should one keep documents such as bank statements or tax papers?
Until recently, I would have suggested that, normally, three years was enough. However, I have recently had to rethink that advice, thanks to a newly rigorous approach being adopted by HMRC to their enquiries regarding gifts.
Gifts made within seven years before death may be chargeable to Inheritance Tax (IHT). It can be difficult for executors to track down details of gifts made during that seven year period. Those who have received gifts may not be very forthcoming, as it may mean more IHT becoming payable.
In an estate of any size, HMRC routinely now ask what enquiries the executors have made into this question of gifts. If HMRC have any reason to suspect that gifts have not been declared they may even, in extreme cases, require the executors to obtain copy bank statements and identify any unexplained items of substance. If it turns out that gifts were made which have not been declared, HMRC will seek interest and penalties. Even if it turns out that there were no gifts, the need to make these enquiries causes delay and increases the expense of administration.
So, to save your executors trouble and expense, make sure you keep detailed records of gifts made. This is especially true if you want to claim the normal expenditure relief that we wrote about in our last issue.
Also, remember the importance of keeping the records that you will need to claim the transferable nil rate band for IHT on the death of a surviving spouse – also covered in a previous edition of Life Matters!