HMRC Compliance Checks FAQ

Record keeping

55. What is the current requirement?

For Income Tax, Capital Gains Tax and Corporation Tax the law say that records must be kept in order to enable a complete and correct tax return or claim to be made. These include records of receipts and expenditure and sales of purchases of goods where relevant.

For VAT business and accounting records must be kept plus any specified records.

56. Have the time limits for keeping records changed?

No. They remain six years for Corporation Tax, 5 years 10 months and 1 year 10 months for Income Tax and Capital Gains Tax respectively depending on whether or not the taxpayer is in business.

In consultation respondents felt that a reduction would not provide major savings since records need to be kept for other purposes. They thought the new flexibility being offered was likely to be of more use.

57. What sort of conditions will be set for keeping information instead of records?

HMRC already specify some high level conditions for Income Tax, Capital Gains Tax and Corporation Tax. Taxpayers can keep information instead of records but need to be able to show that a complete and correct tax return has been made. The information must also be able to be provided in a legible form on request.

For VAT HMRC's prior approval was required. This legislation does away with the need for approval. To balance this HMRC will be able to set conditions and exceptions.

58. Does this mean changes to keeping information instead of paper records?

There are existing rules about keeping information instead of paper records but they differ across taxes. This legislation aligns the rules. In practice, taxpayers will be able to keep their records in electronic format very much as they do now.

59. When will HMRC allow a shorter time limit for keeping records?

Where the records are bulky and the information they contain can be provided in another way. Guidance will explain where it will be appropriate.

60. Have penalties for failing to keep records changed?

No. They will be looked at in a further phase of the review including the scope for suspending penalties. In the meantime the current penalties will continue to apply.