The seven year rule on gifting money - how do ‘they’ know?

[Pbok]

My DF thinks that when someone dies, HMRC has full access to last seven years of their bank accounts and go through them with a fine toothed comb, looking for any and all money transfers.

For this reason, if he owes me any money even day just £20, he prefers to give it me in cash.

Is he right? How do ‘they’ know?

What about physical items?

If they gifted some gold bars which they purchased 20years ago?

Gifted a car which they bought 10yrs ago by just transferring names of ownership without exchanging cash?

Jewellery bought many years ago worth £100k and passed on?

If no one says anything, they just get away with it?

You'd only pay CGT on any increase in value since death so depending on when she died, not a huge amount

I know that @gcsedilemma but my concern was about a very low valuation after her death on a house difficult to value, and how that would be treated if the house goes for more a few months later. Could be £50k difference. But it was answered by taxguru and Chewbecca

Yep

But these gifts are more than 7 years before death

No, the gifts where purchased over 20yrs/10yrs ago but were recently given in the last 3 or 4 years.

The original transaction originally happened 20yrs ago (gold bars example), therefore, a bank statement can't prove anything in this instance.. I should've been clearer.

I think in those cases, the items would be expensive enough that the original holder would have insured them (well, it would have been wise!), and that would show up somewhere.

This is correct. We give our DC both a lump sum and monthly payments out of income.
Larger gifts would have to be declared and if less than 7 years ago may affect the estate.
Of course all this is only important if the deceased person owns enough assets to be liable for IHT which the vast majority of the population do not unless in expensive houses in the SE.

I've done a few probates. The executor fills out a form. HMRC are highly unlikely to want to scrutinise bank accounts.

My advice is tell the truth. I have helped with one probate which was subject to IHT and another that wasn't. With the first the solicitor wanted to submit professional valuations of some land and property - the valuation cost £6000.00 and was by director of well known valuation team - HMRC queried it saying they thought it was too low and the solicitor and valuer had to have further discussions to justify the valuation. The solicitor said more and more relatively small estates are being queried. The executors, elderly relatives, asked for my help but wanted to try and hide or undervalue, the solicitor and I explained that they personally would be liable and could face fines up to 100% of any unpaid tax on gifts or items they had not listed. I know for a fact that HMRC can and do check such things..... If an executor is doing all this without a solicitor, as I did for non IHT probate, then it is up to them, but I listed the value of jewellery sold, and some furniture sold on gumtree - I wanted the probate to be exact and honest so that the beneficiaries could see this too. HMRC do and will scrutinise bank accounts if they have any concerns, it may also hold up probate. IF you undervalue a property and it sells shortly after for more, I think it can be dealt with two ways, send an adjustment or the beneficiaries of the sale have to pay CGT on the difference? If it sells for less than you also can send an adjustment and get a refund on IHT paid on the difference. I read somewhere that HMRC have stepped up on scrutinising and our solicitor said this too, no solicitor is going to want their name linked with probate where there are lies - it doesn't help their reputation. In one month alone I read (sorry can't find it atm) that on average the amount of extra IHT claimed averaged out per probate, was £600K - so I am assuming several multi million pound estates involved plus huge fines.

Lots of good advice from @taxguru

I've also done a lot of professional probate. The issue with a lot of bigger and more complicated estates is that the executor may well have been the client's accountant for a number of years and would have prepared tax returns for them and therefore have a pretty good idea of where their accounts were held and how much was in them. Where non financial assets are concerned they may well also have advised on the purchases.

IME it is the bigger estates with the more complicated assets that attract the attention of the IHT team - things like agricultural land, businesses, large properties with ancillary accomodation and substantial valuable chattels. These estates are also likely to have larger costs and I've known HMRC go through these with a fine toothcomb

"Normal" estates under about £1m are far less likely to be scrutinised.

I had to arrange for a finacial check of my Father's assets as he had money all over the place! It cost £400 which I thought was good value as we found a bank account with £6k in it. My Father lost of track of what he did with his money!

If a couple has enough to live on from company and state pensions can they give away the interest made from any investments and savings they have? Therefore, not touching the capital or savings but 'spending' the interest on family etc?

I believe you can give unlimited amounts from income as long as afterwards you still have sufficient income to maintain yourself

‘They’ don’t.
Maybe 1/1000 people get estate checked, in the same way that the self employed sometimes get randomly checked.