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Record keeping for tax… Like a boss!

record keeping for tax

Businesses have to keep records. They will provide the information that goes on tax returns. HMRC may ask for business records and there are penalties for incomplete or inaccurate records.

What are records?

Records will support any income or expenses included in a tax return, or any claims or elections made.

While a bank statement will show the cash transaction, the records will explain the reason for the transaction.

Paper or digital copies?

Records can be in paper copies. There is the option of storing records electronically provided all the required information is captured.

Records lost or destroyed?

If records are lost or destroyed and cannot be replaced you need to:

  1. Tell HMRC what happened.
  2. Do your best to recreate them.
  3. Tell HMRC if any provisional or estimated figures are used in completing a return using the ‘any other information box’.

How long to keep records for?

Depending on the tax, the deadline varies as follows.

  Time
limite
Illustrated
deadline
Income
Tax (not sole trader)
1 year from 31 January following the
tax year
31 January 2021 for tax year 2018/2019
Income
Tax (sole trader)
5 years from 31 January following the
tax year
31 January 2025 for tax year 2018/2019
Corporation
Tax
6 years from end of accounting period 31 March 2025 for accounting period
end 31 March 2019
PAYE 3 years from end of tax year 5 April 2022 for tax year 2018/2019
VAT At least 6 years  

What can change the deadline?

Deadlines are extended under those circumstances:

  • If return is filed late.
  • If return is subject to an enquiry or compliance check.
  • If records relate to a transaction spanning more than one year.
  • If an asset is expected to have a life longer than the time limit.

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