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Self Assessment introduced a legal
requirement to maintain proper records of any transactions that may have
tax consequences.
Most importantly, it is not only those in
business that are affected - there are requirements for employees and,
in fact, anyone with taxable income of any kind.
Failure to keep
'adequate'
records and documents can lead to a fine of up to £3,000.
All individuals are
required
to keep documents relating to investments, such as bank statements for
interest-bearing accounts, building society passbooks or statements and
dividend counterfoils.
Paperwork relating to taxable state
benefits must also be retained, including details of:
-
Retirement pension
-
Incapacity benefit
-
Jobseeker’s allowance
-
Bereavement allowance
Other documents such as Child Support
Agency assessments and marriage certificates may be relevant for tax
purposes and should also be preserved.
Employees (including company directors)
If you are an employee, further items and
information you should keep include:
-
Form P60 (the certificate of pay and tax
deducted issued by the employer at the end of the tax year)
-
Form P45 part 1A (issued by the employer
when an employee changes jobs)
-
Payslips (even though identical pay and
tax information may also be shown on a form P60 or P45)
-
Details of tips, gratuities or incidental receipts
(the Inland Revenue have stated that this should be written up on a
daily basis)
-
Details of taxable benefits and expenses received
(the employer must supply a copy of form P9D or P11D, where
appropriate)
-
Details of tax-allowable expenses incurred
(supporting vouchers are required, e.g. credit card statements,
phone accounts, restaurant bills, car park tickets etc)
-
A log of business journeys by car (showing
the date, purpose and mileage of each business journey, this applies
to both company car drivers and those who use their private car on
company business. The log need not include journeys to and from the
normal place of work, which are treated as private motoring)
In certain circumstances, other records may also be
required, for example share option rights awarded or exercised.
Self Employed (including partners)
The precise nature of books and records to be
maintained will, to some extent, depend upon the type of business
carried on and the scale of the operations. All traders, however, are
now required to keep the following:
-
Bank and/or building society statements
for any accounts used for business purposes
-
Copies of sales invoices and a day-by-day
record of goods taken from stock for private use or services 'bartered'
with other traders. Retailers and service business retailers (e.g.
hairdressers) should keep till rolls or some alternative means of
recording sales
-
Invoices and receipts for all purchases.
The original invoice or receipt must be retained, even after the
relevant transaction has been written up in the trader's books. A
detailed day-by-day record should be maintained of any expenses
incurred where it is not possible to obtain a receipt (e.g. parking
meter charges)
The Inland Revenue have stated that they will not accept rough-and-ready estimates of how telephone and motoring
expenses should be split between business and private use.
It is therefore necessary to request itemised
telephone bills and mark either all business calls or all private calls,
whichever is easier.
Motor expenses should be dealt with by way of a
detailed travel log, showing the date and purpose of each business
journey. Mileometer readings should be recorded now, at the end of every
accounting year, and every time a vehicle is bought or sold.
Keeping them for how
long?
Everyone must retain their documents and
records at least until the anniversary of the Tax Return filing date.
For example, the tax year 2006/07 filing date is 31 January 2008, so all
relevant material should be held until 31 January 2009.
The self-employed (including
partners in business) and anyone receiving rent or other income from
property must retain records for
5 years from the filing date, so for 2006/07 this means until
at least 31 January 2013. Even longer retention periods can apply if a
Tax Return is filed late or if there is a Revenue investigation.
It should be noted that the self-employed
and landlords must keep
all their tax records for 5 years - not just those relating to
their business or let property.
Please
note: This guide is intended to provide basic information only.
Where specific advice is required, we recommend that you seek proper
professional help; either from this firm or other suitably qualified
person or practice. |
