Record keeping for Corporation Tax

Good record keeping for Corporation Tax is essential if you have this tax liability; you must keep and retain adequate business and accounting records to file an accurate Company Tax Return and calculate how much Corporation Tax you need to pay.

This guide gives an overview of the records that you need to keep for Corporation Tax purposes. It explains how long you normally have to retain them for and when you may have to retain them for longer than usual. It also explains what happens if you don’t keep adequate records or retain them for long enough.

Business and accounting records you must keep for Corporation Tax

If your company or organisation is liable for Corporation Tax you must keep and retain adequate business and accounting records.

What are accounting records for Corporation Tax purposes?

If your company is registered at Companies House, you must keep and retain certain accounting records showing your company’s transactions and its financial position. You have to do this even if your company is not currently trading or no longer trading. These records include:

  • a record of your company’s assets, for example, a record of ‘capital expenditure’ such as the purchase and sale or disposal of company assets, equipment, office furniture and vehicles
  • a record of your company’s liabilities
  • a record of your company’s income and expenditure
  • details of any stock on hand at the end of your financial year

Generally, if your company keeps these records, you will not need to keep any more for Corporation Tax.

What are business records for Corporation Tax purposes?

The business records that your company or organisation must keep for Corporation Tax purposes must:

  • be complete and up to date
  • allow you to work out correctly the amount of Corporation Tax you owe to HM Revenue & Customs (HMRC), or can reclaim from HMRC
  • allow you to file an accurate Company Tax Return
  • be easily accessible if HMRC asks to see them during an enquiry into your Corporation Tax affairs

An example of the business records that you may find it useful to keep includes the following:

  • annual accounts, including your profit and loss statement and balance sheet
  • bank statements and paying-in slips
  • a cash book and any other account books you keep
  • purchases and sales books or ledgers
  • invoices and any record of daily takings such as till rolls
  • order records and delivery notes
  • a petty cash book
  • other relevant business correspondence

How long your company or organisation must normally retain records

 You must normally retain your company or organisation’s business and accounting records for at least six years from the end of your Corporation Tax accounting period. For example, if your accounting period ends on 31 March 2009, you’ll need to keep the records for that period until at least 31 March 2015.

You don’t need to keep the vast majority of your records in their original form. If you prefer, you can keep a copy of most of them in an alternative format. For example:

  • scanned PDF
  • files saved on a CD-ROM
  • files saved on an optical imaging system

Whatever alternative format you choose, your records must be legible and you must be able to produce them in a readable format if you need to.

But there are certain records that you must keep in their original form. These include:

  • dividend vouchers
  • bank interest certificates
  • Construction Industry Scheme (CIS) vouchers – (these vouchers were used before the current scheme was introduced in April 2007)

From 1 April 2009 HMRC can specify in writing that records may be kept for a shorter period.

When you may need to retain records for longer than six years

 In some circumstances, your company or organisation may need to keep records for longer than the normal six years from the end of your Corporation Tax accounting period.

Business records that cover more than one accounting period

Sometimes your business records might cover more than one accounting period. Examples of when this might happen:

  • a loan agreement where you claim your interest payments as a deduction over several Corporation Tax accounting periods
  • an insurance premium that straddles two Corporation Tax accounting periods

If your company or organisation’s business records cover more than one accounting period, you must keep these records for at least six years from the end of your latest Corporation Tax accounting period to which the records relate.

Example:

  • Your Corporation Tax accounting period ends on 30 June each year.
  • You took out a five-year loan on 1 January 2008 with interest payable over the five years.
  • The loan comes to an end on 30 December 2012, during your accounting period that ends on 30 June 2013. Six years from the end of this accounting period is 30 June 2019. Therefore you must keep all records relating to that loan until 30 June 2019.

Records for capital expenditure – assets kept for more than six years

Your company or organisation must retain records of capital expenditure from the date any asset is purchased until at least six years after the date it’s sold, transferred or otherwise disposed of. This may be more than six years from the date you acquired the asset.

Company Tax Returns filed late

If you file your Company Tax Return late you may need to retain the associated business records for more than six years. You’ll need to retain the records until the deadline for HMRC to make an enquiry into that return has passed. HMRC will normally tell you within 12 months of the date when you filed your return if they intend to start an enquiry.

Company Tax Returns under enquiry with HMRC

If HMRC makes an enquiry into your Company Tax Return, amendment or claim, you may need to retain your company or organisation’s records for longer than normal. For example if a return, amendment or claim is under enquiry, your company or organisation must retain the business records relating to that particular accounting period until the enquiry is completed.

What to do if your records are lost, stolen or destroyed

If your company or organisation’s business records are lost, stolen, or destroyed and you can’t replace them, you must tell HMRC as soon as possible and do your best to recreate them.

Once you’ve gathered replacement information you can use this information to deliver your Company Tax Return. You must tell HMRC whether any figures in your return are:

  • Estimated figures – best-guess figures that you want HMRC to accept as final figures in lieu of actual figures as you cannot supply actual figures.
  • Provisional figures – figures you are using until you can confirm the actual figures. You must tell HMRC when you intend to supply actual figures.

What happens if you don’t keep or retain adequate records?

If your company or organisation does not keep adequate records for Corporation Tax purposes, or does not retain records for long enough, you may be charged a penalty of up to £3,000.