Questions of Cash: Records should be kept for at least two years

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How far back should we keep records such as bank, building society and credit card statements, cheque stubs, bills and receipts? How far back can the Inland Revenue demand financial records?
FP, Devon.

How far back should we keep records such as bank, building society and credit card statements, cheque stubs, bills and receipts? How far back can the Inland Revenue demand financial records?
FP, Devon.

A. John Whiting, a tax partner at the accountant PricewaterhouseCoopers, says: "The basic Inland Revenue rule is that records should be kept for two years or six years for a business.

"All taxpayers must keep basic records for that shorter period, including people who do not submit a tax return.

"These records include your P60 or P45 (records of pay and tax), P11D (the statement of benefits from your employer), dividend vouchers and certificates of interest deductions from banks and building societies. The longer term applies to business records, including rental businesses and buy-to-lets.

"But you will have to keep records for longer if you have an Inland Revenue inquiry in progress or if a tax return is issued late, so that the submission deadline is later than the traditional one."

Mr Whiting adds a cautionary note, following a tax case earlier this year, in which the Revenue were permitted to go further back in the affairs of one person relating to a property valuation.

"If your records include something such as a property valuation, you need to disclose it carefully and retain the details for a lengthy period," he says.

"How long a period is not wholly clear at present. The Inland Revenue publishes a leaflet on this - SABK4 - Self Assessment: a general guide to keeping records. You can find it at www.inlandrevenue.gov.uk/pdfs/sabk4.htm or ask at a tax office."

Q. I complained to Sun Life Financial of Canada about the mis-selling of an endowment policy.

The company accepted mis-selling had occurred and offered a settlement. I sought clarification, and after three months the company overturned its decision and withdrew the offer. I complained to the Financial Ombudsman Service (FOS), which rejected my complaint. This has been confirmed on review by an adjudicator.

Your comment suggested a second review stage is available at FOS, but the adjudicator did not refer to this. Is your information correct?
TD, Romsey.

A. At our request, Janet Fuller, the chief executive of Sun Life Financial of Canada (UK), has personally reviewed your case. She advises that the initial compensation offer was made due to a misunderstanding that came to light when you wrote to the company.

The initial decision was taken on the basis that endowment payments would continue beyond retirement, but when the papers were re-evaluated the company concluded that payments after retirement would be affordable for you.

"We have a robust quality assurance regime to check decisions before a letter is sent to a client, but very occasionally an incorrect decision does get made and communicated to a client," Ms Fuller explains.

"After consultation with senior management, we decided that the original decision should be withdrawn and the complaint turned down.

We do not often withdraw an offer and would never do so once it had been accepted. However, each case is reviewed on its own merits. This was a decision reached after obtaining legal advice and ensuring all considerations were taken into account."

We suggested to Ms Fuller that this appeared a harsh approach, but the company is not prepared to alter its decision.

Our previous comments about the review procedure at FOS were correct.

A complainant unhappy about an initial FOS decision can seek a review by an adjudicator and, if unhappy with that, has the right to have the case personally reviewed by an ombudsman.

Q. I hold a Cardcash low-income account with the Halifax. Holders of these accounts are being penalised, with bank charges increasing and cheque clearance time increasing only for Cardcash accounts.
WK, Bath.

A. Halifax says that the structure of bank charges is the same for its low-income Cardcash accounts and with standard current accounts.

The bank claims the charges merely cover its transaction costs.

"All charges are avoidable if customers manage their accounts properly," says the bank's spokesman, Jason Clarke.

Halifax accepts it has imposed longer delays on cheque clearances for Cardcash accounts, but says this is warranted after problems with customers drawing cash from their accounts against paid-in cheques, which were later rejected by the payers' bank.

"We have experienced considerable fraud and other losses on Cardcash accounts," says a letter from Halifax.

Both the Bank of England and the Office of Fair Trading have put pressure on the sector and called for a reduction in the time it takes for the high street banks to clear cheques.

Q. In 1999, I invested £10,000 in a Scottish Widows with-profits bond. After becoming widowed last year, I had to cash in my investment. But in 2001, Scottish Widows introduced a surrender penalty called the Market Value Reduction (MVR), which cost me £2,213 on top of the investment loss. Scottish Widows insists it has the right to alter policy conditions without consultation. To add insult to injury, I discovered that if my husband had been the sole policyholder, the MVR would not have been applied.
LW, Coggeshall.

A. The application of MVRs has angered many endowment policyholders, but it is fair to point out that this has been an industry-wide response to unexpected falls in stock-market values.

It is implausible that Scottish Widows will change its position on the principle involved in this, whatever the hardship to particular customers, given the total losses the insurers have borne.Scottish Widows states that, contrary to your view, it did specify in its product terms that an MVR (also called an MLA, or Market Level Adjustment) would be applied if investment returns fell.

It says: "All we could do was to make clear there was the possibility an MLA could be applied, if circumstances called for it. Our literature was as clear as possible on this aspect of the policy."

The underlying question is whether you were properly advised that with-profits bonds were risky investments, the performance of which depended on stock-market performance.

If you feel the marketing information was not clear in this area, you should lodge a complaint alleging mis-selling with the Financial Ombudsman Service.

But there is a second issue. The decision for the bond to be held in your joint names, which has clearly led to a material loss, may offer you stronger and more valid grounds for complaint.

You would have been protected from this if you had been advised that the bond should be held solely in your husband's name and you might consider lodging a complaint with the FOS on this basis.

When surrendering with-profits policies it is worth considering selling them instead.

But Colin Jackson of Baronworth, which specialises in brokering sales of endowments, says the market is weak and you may not be able to obtain a higher price selling your policy than the surrender value.Baronworth will obtain a quote for you.

* If you have questions, write to Questions of Cash, 'The Independent', 191 Marsh Wall, London E14 9RS, or e-mail cash@independent.co.uk. We can reply only to letters published. Please send copies, not originals.

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