Taxpayers must now retain records which substantiate the entries on tax returns.
A business taxpayer is required to maintain records which include the following:
- Receipts and expenses
- Sales and purchases
- Other supporting documents
for five years after the filing deadline and for six years for companies.
The penalty for failure to maintain proper records is a maximum of £3,000 which is usually only sought in the more serious situations, such as deliberate destruction of records.
HMRC Manuals state the following as far as record keeping is concerned – “The records that a person keeps will generally reflect the size and complexity of their affairs. They may range from the most simplest of manual records for a sole trader to the most sophisticated computerised system for a multi-national company.”
HMRC’s views on records are that they should:
- Allow the person to make a correct and complete return
- Allow the person to calculate the correct amount of tax
- Enable them to check the figures reported on the tax return
Please therefore bear all of the above in mind when maintaining your personal and business records.
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