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Record keeping and the 20 year rule

Record keeping and the 20 year rule

One of my clients is talking to HMRC about old tax returns from around 10 years ago. HMRC is arguing that there was an underpayment of tax due to deliberate behavior by the client's old accountant, and they're arguing they can go back 20 years. My client has submitted some proposed amendments to his accounts to correct the figures.

HMRC is now saying they cannot now accept certain expense claims because they're not supported by adequate business records. However, bearing in mind we're talking about 10 years ago, the 6-year requirement for keeping business records has passed, and my client doesn't have access to all the papers for that year. The disclosure is voluntary (admittedly under pressure from HMRC), so no formal enquiry was launched at any stage.

How does the record keeping obligation work when amending very old tax returns? And can HMRC question all parts of the accounts and tax return, or only those where there was a deliberate misrepresentation of the figures?


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By John R
03rd May 2012 17:16

Guilty until proved innocent

I am often asked by clients if they can now destroy their old records and I always advise them that whilst there is no legal requirement to keep them, if they have the room, they should do so as the Revenue can challenge the last twenty years in serious cases. The failure to keep records beyond the statutory time period cannot possibly give rise to a s12B (£3,000) penalty but, if the client no longer has the records, he is likely to have great difficulty in proving that the returns were actually correct, should they now be challenged.

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