Do You Really Need to Keep that Paperwork? Rules to Follow

How much paperwork do you have lying around? From old mortgage and investment paperwork to receipts for large purchases, many of us have quite a bit of paperwork situated around our house. Of course, you don’t want to get rid of a crucial documents only to learn you need them for an HRMC compliance check or audit. But you also don’t want to keep it indefinitely. So, when it is time to get rid of these old documents.

the law for keeping mortgage and business paperwork with HMRC and the government

Here’s what you need to know

A Look at Enquiry Time Limits according to the HRMC Handbook,

As of 25 May 2017, the HRMC has up to 15 months from the date you file a return to initiate an enquiry. After this date, tax returns are usually considered “final.”

With that being said, if you feel that you have made an “error or mistake,” you have four years from the end of the year of the assessment to contact the HRMC. Keep in mind these are strict rules regarding what can be corrected.

If the HRMC suspects you provided false information due to “careless behaviour,” they have up to 6 years to file an enquiry.

However, if the HRMC believes that you were “deliberately false” with the information you provided, they can go back 20 years.

The HRMC suggests that you retain your return records for a minimum of 22 months from the end of the year the tax return is for. You can seek professional advice on this matter with one of the leading accountants in Streatham, London.

Real Estate and Mortgage Documents
Typically, it is a good idea to retain your year-end mortgage statements for 3 years. This also applies to property tax payments and Private Mortgage Insurance (PMI). You can choose to hang on to cancelled cheques or bank statements as proof of your deduction. You also have the option of holding on to the actual bills you received.

Be sure to retain receipts for any energy tax credits, such as the installation of energy efficient windows, heating and cooling systems, doors, and solar panels, for as long as you own the property plus 3 years. This also applies to receipts for capital expenses, including home improvement projects and additions. This allows you to provide proof of your deductions and may be beneficial when selling the property.

Real Estate Investments
Landlords should file LLC agreements for any real estate investments for as long as the LLC exists. Landlord insurance policies should be kept until the policy is updated. It is also recommended that landlords retain insurance payment receipts for 3 years.

Other Investments
You should hang onto any records regarding nondeductible contributions to an IRA, ISA, or PPP. To cut down on paper, scan them, save them, and shred the paper copies. When it comes to quarterly statements on any type of investment, keep them until the annual statement arrived. Annual statements should be retained indefinitely.

Insurance and Warranties
Although it doesn’t apply to the HRMC, there is some insurance and warranty paperwork you’ll want to keep. Whether you are a homeowner or are renting the place, it’s strongly suggested that you keep a detailed inventory sheet of your possessions. Any expensive items should include serial/ model numbers and photos. You should keep this for as long as you own the item. Retain any warranties or service contracts until the warranty or contract has expired. This includes car purchases or leasing deals as stipulated by HMRC.

Bank Records, Credit Cards, Bills, and Pay Check Stubs
Thanks to technology, there is really no reason to keep paper copies of your bank statements. You should be able to pull up cancelled cheques online and other types of payment confirmations, if needed. Be sure to shred any paper bank records before disposing of them. This is also true of credit cards. You should be able to find any information you need online, meaning it’s okay to go ahead and shred your statements after looking over them.

After rectifying your monthly bills against your bank statements to make certain everything is correct, you can shred them. This also applies to your paycheck stubs. After ensuring they match up with what is on your P60, shred away.

Medical Records
It’s suggested that you retain your pertinent medical records for 5 years. If they are lost, you can go back to your GP, who will likely provide a copy for a small fee.

Miscellaneous Documents
Property trusts and wills should be retained indefinitely or until they are updated with a new version. Home sale clauses that accompany a divorce decree should be held onto until your ex sells the property, plus at least 3 years.

If you employ live-in help, such as a nanny or housekeeper, keep their entire employee file for a minimum of 4 years after they have moved on.

On a final note, it’s important to remember that you should never simply throw away documents that include your identifying information. Always shred them first!