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 contractors 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 contractors must keep all the records and documents they need to complete the Return. If they don't have adequate records, or if they don't keep them for long enough, they may end up paying penalties.
HMRC recommend that contractors keep all the original documents they receive. This does not mean that they 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 your contractors need to retain certain types of records depending upon whether they are an individual or director, whether they are self-employed, whether they are VAT registered, operate as an employer or work in the Construction Industry.
Your contractors can view more information about the types of records and how long they should keep them by visiting HMRCs website here.
If your contractors have any questions or are uncertain how the rules apply to them, please don't hesitate to call the PayStream Tax Team on 0161 929 6000 or email us at firstname.lastname@example.org