HMRC – scanned electronic receipts and paperwork

Question:

“I run a small limited company and I have a lot of paperwork filed for invoices and receipts. If I keep electronic copies of this paperwork can I get rid of the originals? Do HMRC have any rules on this?”

 

HMRC scanned electronic receipts and paperwork

 

Answer, Jan 2017

It used to be the case that HMRC would only accept hard copies of any documentation that was used to support and prepare a set of limited company accounts.

However, these days software and hardware has the ability to take quality copies of documents and HMRC’s position is that they will allow electronic copies to be held in the place of original documentation.

There are exceptions to this rule, such as where items are received from banks etc which show a deduction of a direct tax (not VAT) – these will still need to be held in the original format they were received – this would include interest and dividend income – if the original document was already an electronic file such as a PDF then that’s fine.

If you are going to only keep electronic copies of your documentation, there are some rules HMRC require you to follow:

  • Keep a back-up for 6 years after the end of the accounting period– as with hard-copies HMRC expect you to keep 6 years of electronic archive documentation.
  • Back-up process – as well as keeping the electronic copies on a drive you need to ensure that this is suitably backed-up – it is very important that your backup process / system is robust to cover worst case scenarios – we would recommend a combination of local and off-site hard drive back-ups as well as online cloud based storage systems.
  • You may need to keep your records even longer if one of the below applies:
    • a transaction covers more than one of the company’s accounting periods
    • the company has bought something that it expects to last more than 6 years, like equipment
    • you sent your Company Tax Return late
    • HMRC has started a compliance check into your Company Tax Return
  • Legibility – all copies should be legible; it is important to make sure that the copy of your documentation is of a decent enough quality so that all the original information can be deciphered. Also, please be mindful of information that may be relevant on the reverse side of the document which may also need to be copied.
  • Maintain a suitable filing system – HMRC would expect that, during a visit from one of their officers, you would be able to locate any document quickly and reliably. We would recommend either attaching the a copy of a document to the relevant transaction in your accounting software or keeping folders in date order with suitable cross-referencing.

Providing the above procedures are consistently followed then you should have no issues with HMRC.

If during a HMRC visit it was noted that you had not kept adequate accounting records, they have the power to issue a fine of as much as £3,000.

In extreme circumstances there is also the threat of disqualification as a director, so it’s vital to take your record keeping seriously.

If you are unsure if your system for maintaining documentation is suitable or compliant then we recommend seeking the advice of a qualified and experienced accountant.

Disclaimer