Everyone working as a contractor, either through a limited company, or as a self-employed person under CIS is required to make a personal Tax Return each year. Depending upon their circumstances, umbrella contractors may also be required to do so.
In the event that HMRC choose to enquire into a Tax Return they will be expecting the contractor to be able to prove that any claims for expenses, claims and deductions can be evidenced by the production of receipts or vouchers.
The tax law says that you must keep all the records and documents you need to complete the Return. If you don't have adequate records or if you don’t keep them for long enough, you may have to pay penalties.
HMRC recommend you keep all the original documents you receive. This does not mean that you need to keep them on paper. Most records can be scanned and kept electronically on a computer or a storage device such as a CD or memory stick. The important thing is that they can be produced in the event of an enquiry.
There are all sorts of different time periods for which you need to retain certain types of records depending upon whether you are an individual or director, whether you are self-employed, whether you are VAT registered, operate as an employer or work in the Construction Industry.
You can view more information about the types of records and how long you should keep them by visiting HMRCs website here.
If you have any questions or are uncertain how the rules apply to you, please don't hesitate to call the PayStream Tax Team on 0161 929 6000 or email us at firstname.lastname@example.org