“How long do I need to keep business invoices?” This is a question that new sole traders and company directors often ask. Before we answer that question, we think it is probably more important to clarify just what invoices you need to keep!
Keeping hold of invoices issued by your business is necessary for a number of reasons. It allows you to keep an eye on your financial resources as you operate, it makes your tax obligation responsibilities less complicated and you will certainly benefit from having them if HMRC ever decides to carry out an audit of your tax affairs.
HMRC recommends that you maintain receipts for all business expenses as well as sales. This could suggest keeping hold of:
- Your billings sent out to others
- VAT records
- Personnel PAYE documents
- Expenses and overheads
- Your personal earnings
- You might even need to maintain mileage records if you are running a company car or fleet
Do I have to keep paper receipts?
A lot of business expense receipts will certainly not need to be retained in paper, you can keep them stored digitally by using online applications and technology. HMRC state that however documents are stored, they only require them to be legible.
Among the most effective tools to save your organization receipts electronically is using the HMRC-approved software program. The software application accepts invoices imported from various other platforms such as PayPal, or you can conveniently snap a photo of the invoice from the Receipt Bank App, where it will after that be kept on your account for as long as you need it.
How long do I need to keep business receipts?
The general rule is that a sole trader will need to maintain their invoices for five years and limited companies ought to maintain them for six years. Yet the countdown doesn’t start when you send your return. Instead, it begins on the 31st of January after the tax year ends. The reason for this is due to the fact that the end of January is the due date for sending an income tax return for the previous tax year.
Some people must keep their company receipts longer, especially if you have:
- Filed your tax return late
- You have been investigated by HMRC in the past
- Are presently under investigation
Does that mean HMRC can only investigate the last 5 or 6 years?
No – HMRC can commence a tax investigation on a business or individual over the previous twenty years if they suspect tax evasion.
For that reason, you might wish to save all your business documents for longer than the advised five or six years.
Will I be able to claim expenses without receipts?
Surprisingly, there is a method to account for costs without having an invoice. The overall objective is to please the HMRC assessor if they ever begin asking inquiries. The obvious method to process a claim without an invoice is to still own the thing you purchased and also to give some accurate info concerning the time of acquisition as well as how much it cost, maybe even a bank statement stating the same.
What to do if you have lost your receipts…
Don’t stress way too much if you have lost an invoice or receipt, these things happen, and if it is on a large scale, perhaps a computer problem or fire for example, then notify HMRC straight away. It is much better to allow them to make note of this and advice on how to proceed, as it shows sincerity on your part and collaboration could work in your favour over time.
Within your tax return, there is an option to give estimates in the event that receipts end up being lost or damaged, but you must give why you are estimating parts of your return and if this is required, then it is always best to deal with this via your accountant, so as not to run into any problems with HMRC.If you are stressed that HMRC may have a problem with your documents, speak with us for suggestions and support – Contact us <<here>>.