TMA 1970, s. 12B sets out general record-keeping obligations for income tax, corporation tax and capital gains tax. The main requirement is that the taxpayer should keep such records as may be required for the purpose of making and delivering a correct and complete return.
Taxpayers carrying on a trade, profession or business are required by s. 12B(3) to keep a record of:
The ‘supporting documents relating to such items
The ‘supporting documents’ including accounts, books, deeds, contracts, vouchers and receipts.
Although the record-keeping requirement is more detailed for taxpayers carrying on a trade, profession or business, the provisions remain general in that they do not specify what those records should be. This is left flexible because of the wide range of business and on-business taxpayers it has to cover.
In the course of a compliance check, HMRC will want to establish the full range of business activities to check that the records are adequate for the purposes of accurately recording all aspects of them. They will look closely at the possibility of any ancillary income arising within the business – for example from the sale of scrap or waste. Where income is received in cash, they will want to be sure that the records reflect the full amount and follow the trail from the time of receipt until it is spent or banked.
Finance Act 2008, Sch. 37 will be covered in more detail in the Examination of Business Records division when that division has been amended for the new provisions.