Time limits for keeping records
Record keeping is a rather dry subject, but it is important not to destroy records which HMRC may later insist on seeing!
I have looked at what VAT records a business is required to keep here, but how long must they be kept for?
This is seemingly a straightforward question, but as is usual with VAT there are some ifs and buts.
The basic starting point
The usual answer is that VAT records must be kept for six years. However, there are circumstances where that limit is extended and also times when it may be reduced. Although the basic limit is six years, unless fraud is suspected, HMRC can only go back four years to issue assessments, penalties and interest.
Variations to the six year rule
Mini One Stop Shop (MOSS)
If a business is required to use the MOSS then its records must be retained for ten years (and they should be able to be sent to HMRC electronically if asked).
Capital Goods Scheme (CGS)
If a business has assets covered by the CGS, eg; certain property, computers, aircraft and ships then adjustments will be required up to a ten year period. Consequently, records will have to be retained for at least ten years in order to demonstrate that the scheme has been applied correctly.
Land and buildings
In the case of land and buildings you might need to keep documents for 20 years. We advise that records are kept this long in any event as land and buildings tend to be high value and complex from a VAT perspective, However, it is necessary in connection with the option to tax as it is possible to revoke an option after 20 years.
Transfer Of a Going Concern (TOGC)
This is more of a ‘who” rather than a what or a how long. When a business is sold as a going concern, in most circumstances the seller of the business will retain the business records. When this happens, the seller must make available to the buyer any information the buyer needs to comply with his VAT obligations. However, in cases where the buyer takes on the seller’s VAT registration number, the seller must transfer all of the VAT the records to the buyer unless there is an agreement with HMRC for the seller to retain the records. If necessary, HMRC may disclose to the buyer information it holds on the transferred business. HMRC do this to allow the buyer to meet his legal obligations. But HMRC will always consult the seller first, to ensure that it does not disclose confidential information.
How can a business cut the time limits for record keeping?
It is possible to write to HMRC and request a concession to the usual time limits. HMRC generally treat such a request sympathetically, but will not grant a concession automatically. If a concession is granted there is still a minimum allowance period of preservation which is in line with a business’ commercial practice. Examples of the recommended minimum periods of preservation for certain types of manual records are:
| Type of record | Minimum period of preservation | |
| Sales or service dockets (mainly used by large organisations especially those involved mainly in retail trading e.g. mail order houses). | No restriction | |
| Copies of orders, delivery notes, dispatch notes, goods returned notes, invoices for expenses incurred by employees. | 1 year | |
| Production records, stock records (except those for second hand schemes), job cards, appointment books, diaries, business letters. | 1 year | |
| Import, export and delivery from warehouse documents. | 3 years | |
| Daybooks, ledgers, cashbooks, second hand scheme stock books. | 3 years | |
| Purchase invoices, copy sales invoices, credit notes, debit notes, authenticated receipts. | 4 years | |
| Daily gross takings records, records related to retail scheme calculations, catering estimates. | 4 years | |
| Bank statements and paying in books, management accounts, annual accounts. | 5 years | |
| Electronic Cash Registers (ECR) and Electronic Point of Sale (EPOS) equipment | 4 years | |
| Any record containing the VAT account | No concession |
Computer produced records
Records produced by a computer system do not necessarily conform to the patterns of manual systems. However, HMRC usually applies the time periods in the table above. This is as long as an inspector is able to determine the documentation necessary to provide a satisfactory audit trail. Where records are stored in an electronic form, a business must be able to ensure the records’ integrity, eg; that the data has not changed, and the legibility throughout the required storage period. If the integrity and legibility of the stored electronic records depends on a specific technology, then the original technology or an equivalent that provides backwards compatibility for the whole of the required storage period must also be retained.
How to keep records
HMRC state that VAT records may be kept on paper, electronically or as part of a software program (eg; bookkeeping software). All records must be accurate, complete and readable.
Other taxes
This article considers the record keeping deadline rules for VAT. Many records kept for VAT purposes will overlap with records for other taxes, and the detailed rules as well as the retention periods may differ.
Information on the record keeping requirements for other taxes is available in the following publications:
- a Guide to Corporation Tax Self Assessment for Tax Practitioners and Inland Revenue staff
- a general guide to Corporation Tax Self Assessment CTSA/BK4
- a general guide to keeping records for your tax return
These are available on the HMRC website
Penalties
If a business’ records are inadequate it may have to pay a record-keeping penalty. If at an inspection HMRC find that records have deliberately been destroyed your they will apply a penalty of £3,000 (this may be reduced to £1,500 if only some of your records are destroyed). In addition, there will be questions about why they have been destroyed.
Finally, it should be remembered for wrongdoing, there is no limitation period on debts to the Crown. You can always be pursued for tax and VAT with no time limit.
Please contact us if you have any queries, or if retaining aged records creates a problem.