The March 2021 Facebook live talked about Paper Receipts and I wanted to add the information into a blog post for you.
How long do I need to keep my receipts for?
If you are a sole trader, you need to keep your receipts for 5 years. If you are a limited company, you need to keep them for 6 years.
It is important to note that the date you need to keep your receipts from is not the date your financial year ends, but it is actually January 31st after the tax year ends. This takes into consideration that the end of year tax return must be filed by January 31st of the next year. For example, for the 2019-2020 tax year, your tax return doesn’t need to be filed until 31/01/2021. In that instance, you would then be required to keep your records for 5 or 6 years from 31/01/2021.
You might need to keep your receipts for a longer period of time if you filed your return late, have been investigated before by HMRC or are currently under investigation.
There is no guarantee that HMRC won’t ask to see records that go back further as they can investigate any time period over the previous 2 decades – so you may want to store the receipts for a longer period of time.
Do I need to keep paper receipts, or can I digitise them?
It is relatively new that HMRC are now accepting digitised receipts for most items, which means you won’t need to store the paper copies as long as you have got a digitised copy.
With the various cloud-based software, and in line with Making Tax Digital, you can attach the digital copies of all receipts and invoices to the transactions in the accounts meaning that all of your digitised receipts are in one place.
In line with MTD, there are some special items that must be stored digitally in compatible software, but there are some items that HMRC say must still be stored in paper format and they include links like your C79 (Import VAT certificate).
You can read about the rules around MTD and digital record-keeping by reading VAT Notice 700/22 which you can find here. The relevant section you are looking for is section 4 and more specifically section 4.3. However, this does just relate to keeping records in terms of VAT and digital record keeping. As more information is released about MTD for Self-Assessment Income Tax, I will share that information as well.
When do I have to follow MTD?
Currently, in terms of MTD, only those who have had to register for VAT due to reaching the VAT threshold need to follow MTD, but from April 2022 all VAT registered businesses will be required to follow MTD with those businesses who are self employed or landlords that meet the requirements from April 6, 2023.
It would be a good idea to start getting into the habit now in regard to attaching your receipts in a digital format so that by the time you are required to follow MTD you already have all of your processes in place.
You can refer to an earlier blog post I wrote in July 2020 about the updates on Making Tax Digital here.
What else do I need to know?
There are different ways you can digitise your receipts and attach them to your accounts, especially if you are using cloud-based accounts software. Some software, like QuickBooks Online, has in-built receipt capture software but I do find it quite basic and not as efficient.
You can just scan/photograph your invoices and receipts and attach them to each transaction manually or you could use 3rd party software like AutoEntry or Receipt Bank to capture your receipts and send them to your accounts software. My personal favourite is AutoEntry, and I use this with all of my VAT clients. It makes capturing the various purchase invoices and receipts and getting them entered into the accounts software more efficient. Especially the auto scrape feature which can be used to automatically retrieve invoices from many different suppliers.
If you have any questions about what to do with your receipts or about your accounts, feel free to e-mail me and I will get back to you!