HMRC has issued a new guidance dealing with keeping records for business. The guidance states why records should be kept, what records should be kept, and how long they should be kept.

As practitioners will be aware, by law all records and documents which are used to prepare tax returns must be kept. The guidance confirms that while as a general rule records must be kept for a minimum of six years in some instances the requisite time period is different. For example an employer must keep PAYE records for three years (in addition to the current year), as must a contractor in the Construction Industry Scheme.

With regard to how the records must be kept, the guidance confirms that some original paper documents which show that tax has been deducted must be kept, for example a form P60. Other records can be kept electronically.

Failure to keep the correct documents in the appropriate format for requisite period of time can lead to the imposition of penalties.

The full text of the guidance note can be accessed at http://www.hmrc.gov.uk/factsheet/record-keeping.pdf