What do I need to do?

You are required to keep sufficient records to make a correct and complete tax return. You also need to be able to demonstrate in response to our enquiries that this is the case. The precise nature and extent of the records to be kept will be dependent on the type and size of your business. This statement also applies to companies and other concerns within the charge to corporation tax. Further information can be found in our booklet Self Assessment: a general guide to keeping records.

Interaction with the record-keeping requirements of the Companies Act

Companies are already required by Section 221 Companies Act 1985 to keep and preserve specific accounting records in terms which are close to the tax requirements. Any company satisfying the requirements of the Companies Act will have satisfied the requirement to keep and preserve records for tax purposes.

Pay As You Earn (PAYE) Records

The requirement to create and preserve records to make a correct and complete tax return applies to records relating to employee costs in the same way as other business costs. Employers must also preserve PAYE records, that is those additional records created to show that the PAYE system has been operated in a satisfactory manner. 

All records which are required to make a correct and complete tax return must be kept. This specifically includes:

Yes. We can accept methods which keep the information in the records in a different form, such as electronically. This is so long as those methods capture all the information needed to demonstrate that a complete and correct tax return has been made and they are capable of yielding up that information in legible form.

Precisely what information needs to be preserved in this way will vary from business to business. But standard information, such as contractual terms and conditions printed on all invoices, need not be reproduced as part of the record of each transaction.

We accept that information stored in accordance with the Code of Practice on the Legal Admissibility of Information in Electronic Document Management Systems (BSI 1996 DISC PD 0008) will automatically satisfy the tax requirements.

The exceptions, where the original record must be retained, include vouchers for tax suffered or for tax credits in respect of incomings. But photocopies of foreign tax assessments, rather than the assessments themselves are acceptable for the purposes of claims to double taxation relief in respect of foreign tax underlying dividend income from abroad.

The Pay As You Earn (PAYE) regulations do not provide for information to be kept in another form, such as electronically. To help employers we accept that paper records may now be preserved by the use of optical imaging systems, provided that what is retained is a complete and unaltered image of the underlying paper document. 

No, so long as all of the information contained in the original documents can be recovered from the electronic form and can satisfy the requirements for record keeping. 

The basic requirement is that records for a company must be preserved for six years from the end of the period for which the company is required to deliver a tax return. For individuals and partners in business the requirement is to retain records for five years after the fixed filing date. The period for which records must be preserved is extended in particular circumstances. See SA-BK6 (income tax) and the CTSA Guide (corporation tax - para 3.7) for more information.

If you have encrypted the original records you must make sure that you can recover the original information in an unencrypted form so that you can make a correct and complete tax return. You also need to be able to demonstrate in response to our enquiries that that is the case, and we may ask you to produce the unencrypted records. 

Businesses need to bear in mind that when they change or up-date computerised accounting packages, they need to ensure they have the software to access the old data.

No. You are free to use whichever package suits your business so long as it can produce information from which you are able to make a complete and correct tax return.