How long must I keep my records?
Whether you’re a large business, a small business or a taxpayer with a small tax return, there are rules around how long you must keep your records. Are you unsure how long you must keep them, and in what format?
Watch this to find out!
Hi, and welcome to another episode of BaranovTV, designed to demystify the world of accounts and tax and to help your business grow.
In this episode, I thought it might be worth covering some of the basics. We’re doing a lot of tax returns at the moment, and we’re submitting accounts to the Revenue and Companies House on behalf of clients. And we occasionally get asked, “How long should I keep those records for now that that return is done? Because that period is kind of dealt with, how long do I need to keep them?”
People think that that should be six years, but it’s not quite as simple as that.
The amount of time you need to keep the records depends on the type of return that’s being submitted.
So I thought it’d make sense to just run through that in this episode.
If we start with the most basic, that’s an individual’s tax return.
Those records have to be kept for a minimum of 22 months after the year end to which they relate.
So for this cycle with a year end of the 5th April 2019, the filing deadline is the 31st January 2020, and you can destroy those records from the 31st January 2021.
If you’re self-employed, your Self Assessment Tax Return will include all of the income information from your self-employment and in that case, the rules are slightly different.
The Revenue say that those records need to be retained for five years after the January deadline that the self-employment information will be included in.
So for a year end that will be part of the tax return submitted by the 31st of January next year, 31st of January 2020, those can be destroyed in January 2025.
For a limited company, it’s different again.
As you’d expect, there’s more involved, so you’d expect to need to keep those longer. And the Revenue guidance says that those records must be retained for six years from the end of the last financial year to which they relate, as a minimum.
However, if there are records within that block that include transactions that go beyond that year end, then you should keep those records until you get to the end of the period for that set. So also if a transaction or if something is going to last beyond those six years. So for example, if you’ve invested in some large piece of machinery or some equipment whose life will go beyond those six years, you must keep that information beyond that six-year period too.
So for example, for a year end of the 31st of March 2019, which are the accounts that we’re working on in the main at the moment, then you can destroy those records after the 1st April 2025.
However, the other thing to consider is what format these records need to be kept in.
Historically they were always, you went into a company or into individual self-employment, you would always find lots of records. And those records take up space. They take up time to file them meticulously so that you can literally just go to a file and pull it off the shelf and know that you can go straight to the information that you may need. Now, the Revenue don’t actually stipulate that those records need to be in paper.
They are happy for them to be electronic.
And for a business owner, that’s a massive step because you no longer need to have that shelf full of files. You don’t have to have the space it takes up. You don’t have to spend the time in doing that filing. But what they do say is you must be able to produce the records, so a PDF would be ideal. You can replicate those old file formats electronically.
The other beauty obviously is that if you are using QuickBooks or Xero, you can actually attach a PDF of that information to the transaction it relates to. So bills or invoices go onto that transaction. You immediately can go straight to the records, nice and simple.
Also, if you are thinking about using ReceiptBank or Xero Expenses, you don’t even need to bring that paper back to the office or back to your desk. You can use the App. You can scan it, get the photo straight into your bookkeeping system, and that can go straight into the bin. So record keeping is so much easier than it ever has been, and it’d be really good to take advantage of some of that.
But hopefully this episode will just shed a little light on the deadlines that apply to tax returns, self-employment, and accounts records.
The one other thing to remember is that if you do sign an original signature on a legal document, always pull those out. Always keep those. Those are well worth keeping the original copy of, rather than electronically, unless they’ve been signed through something like DocuSign or one of the options.
So hopefully that’s shed some light on the subject, and I’ll see you all very soon.
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