How long do I need to keep business receipts? It is a common question that new sole traders and limited company owners often ask. So, is there an easy answer? Find out how long you should keep receipts to satisfy HMRC officers in today’s post.
But First, What Receipts Do I Need to Keep?
Keeping business receipts is important for lots of reasons. It enables you to monitor the business’s finances as you operate, it makes your tax obligations easier – and you will benefit from having them if HMRC ever launches an investigation into your tax affairs.
HMRC recommends that you keep receipts for all business expenses and sales. This could mean keeping hold of:
- Your invoices sent to others
- Your business bank statements
- VAT records
- Staff PAYE records
- Business expense receipts
- Your personal income
- You may even need to keep a mileage record
Do I Have to Keep Paper Receipts?
Most business expense receipts will not need to be in paper form, and it could be safer not to. You can keep them stored digitally by scanning them or by utilising new apps and technology. HMRC state that any receipt must be readable so they can determine if the expense claim is genuine.
Modern businesses can simplify keeping records of receipts by using the best technology and accountancy software that links receipts with your bank account and to your accountant. Learn more about these time-saving methods in our post on the best modern business banking methods.
One of the best tools to store your business receipts digitally is using the HMRC-approved Receipt Bank software. The software accepts receipts imported from other platforms such as PayPal and bank accounts, or you can easily snap a photo of the receipt from the Receipt Bank App, where it will then be stored on your account for as long as you need it. Overall, Receipt Bank is one of the best tools to streamlining bookkeeping and storing your business receipts digitally.
How Long Do I Need to Keep Business Receipts?
The general rule is that a sole trader will need to keep their receipts for five years and limited companies should keep them for six years. But the countdown doesn’t start when you submit your return. Rather, it begins on the 31st of January after the tax year ends. The reason for this is because the end of January is the deadline for submitting a tax return for the previous tax year. You can find more of HMRC’s key tax deadlines on our blog.
Some people should keep their business receipts longer, especially if you have:
- Filed your tax return late
- You have been investigated by HMRC in the past
- Are currently under investigation
Does that Mean HMRC Can Only Investigate the Last Five or Six Years?
No – HMRC can launch a tax investigation on any person or individual for any return over the previous two decades if they suspect tax avoidance.
For that reason, you may wish to store all your business records for longer than the recommended five or six years.
Will I Be able to Claim Expenses Without Receipts?
Surprisingly, there is a way to claim for expenses without having a receipt. The overall goal is to satisfy the HMRC inspector if they ever start asking questions. The obvious way to claim without a receipt is to still own the item you bought and to give some accurate information about the time of purchase and how much it cost, maybe even a bank transaction.
Sensible estimates can even be accepted in some situations. It is best to speak with a trusted UK accountant if you want more information and guidance on claiming expenses without receipts.
What to Do if You Have Lost Your Business Receipts
Don’t worry too much if you have lost an invoice or business receipt. It can happen and does happen more than you and HMRC would like.
If you find that you can no longer locate your records – maybe your laptop was damaged and they weren’t backed up – you need to inform HMRC straight away. It is better to let them know before they ask you to prove your affairs in an investigation, as it shows honesty, cooperation and could work in your favour over time.
Within your tax return, there are ways to provide estimates in the event that receipts become lost or damaged. You must provide information on why you are estimating parts of your return if this is the case. A UK accountant may be required to ensure you estimate accurately and suffice any tax officer concerns.
Get Help with Your Tax Affairs with Yorkshire Accountancy
Our friendly team has helped lots of people overcome problems with lost invoices and missing business expense receipts. If you are worried that HMRC may have a problem with your records, speak with us for advice and guidance.