Records have to be maintained by retailers to support returns they make to HMRC in 3 distinct areas of tax:
- Income Tax and Corporation Tax
- PAYE and NI
For Income Tax and Corporation Tax purposes for retailers
Records to be kept by retailers:
- till rolls or other forms of electronic record of sales
- details of any other income, for example, commission for
the National Lottery or football pools
- a separate record of
– any goods taken for your own or your family’s personal use, or provided in exchange for other goods or services
– any other items not rung through the till, such as commission from football pools or dry cleaning, or rent from the flat above the shop
– any cash taken out of the till to pay small business expenses
- bills/invoices for purchases and expenses
- a record of stock on hand at the end of the year
- all bank and building society statements, passbooks, cheque stubs and paying-in slips which include details of business transactions
- cash books
- details of any private money brought into the business
- details of any money taken out of the business bank account, or in cash for your own or your family’s personal use
- details of any assets used for both business and private purposes. If you use the same vehicle for both business and private purposes, you should keep enough details to enable you to split your total expenditure between business and private use. Usually it will be enough to keep a record of business and private mileage and split the vehicle running costs in the same proportions. There may be other assets that you use for both business and private purposes, for example, a house or shop premises that includes a flat. Again, you should keep enough details to enable you to split your total expenditure between business and private use.
For how long?
If you are self-employed or in partnership you must keep your records for at least five years from 31 January following the tax year that the tax return relates to.
For example, if you filed your 2009–10 tax return by 31 January 2011, you should normally keep your records until 31 January 2016. You’ll need to keep your records for longer if you file your tax return late, if we have started a check of your return, or if you’re buying and selling assets.
The records for an accounting period will normally have to be kept for six years from the end of that period. For example, if the accounting period ended on 31 December 2010, the records must be kept until 31 December 2016.
Please note that if you send in your return late, or it is subject to a compliance check, then the time limit for keeping records may be extended.
For VAT purposes for retailers
For a standard point of sale scheme
(no account has been taken of any further requirements in special schemes for retailers or sector schemes)
The records to be kept:
In addition to the records kept for direct tax purposes outlined above you need to keep two records that are specifically required for VAT. These are:
- The VAT account. In many cases this will based on a routine business record of VAT owed or claimable.
- A VAT invoice for supplies to other VAT registered businesses. A ‘VAT invoice’ is just the term for an invoice which contains some information required by VAT rules.
The VAT account
The VAT account is the link – the audit trail – between your business records and your VAT return. Every VAT registered business must retain a VAT account and it will help you to fill in your VAT return. But there is no set format for a VAT account as long as it contains the information described in this section.
You can keep the VAT account in the way that suits your business, provided it contains the information described below.
To show the link between the output tax in your records and the output tax on the return, you must have a record of:
- the output tax you owe on sales
- the net sales excluding the output tax
- tax that needs to be paid following a correction or error adjustment
- any other adjustment required by VAT rules
To show the link between the input tax in your records and the input tax on your return you must have a record of:
- the input tax you are entitled to claim from business purchases
- the net purchases excluding the input tax
- tax that you are entitled to following a correction or error adjustment
- any other necessary adjustment.
Special rules apply and additional records need to be maintained for goods sold or purchased from other EU member states.
VAT Invoices issued by retailers
There is no requirement to issue a VAT invoice for retail supplies to unregistered businesses. As a retailer, you may assume that no VAT invoice is required unless your customer asks for one. If you are asked for an invoice then you have the following options:
– If the charge you make for the individual supply is £250 or less (including VAT) then you can issue an invoice showing:
- Your name, address and VAT registration number
- The time of supply (tax point)
- A description which identifies the goods or services supplied
- For each VAT rate applicable, the total amount payable, including VAT shown in sterling and the VAT rate charged
Exempt supplies must be included in this type of VAT invoice.
– If the charge you make is more than £250 and you are asked for a VAT invoice then you must issue either a
- Full VAT invoice, or
- A modified VAT invoice showing VAT inclusive rather than VAT exclusive values
For how long?
Generally, you must keep all your business records for VAT purposes for at least 6 years.
If the 6-year rule causes you serious storage problems or undue expenses, or you need advice on records for other types of tax, then you should consult the HMRC advice service. They may be able to allow you to keep some records for a shorter period.
For PAYE and NIC purposes for retailers
The records to be kept
These must include:
- a record of the employee names and addresses.
- payslips or some other record showing their gross earnings, the tax, NICs and any student loan repayments you deduct, and their net pay – you can use a form P11 or an equivalent payroll record (such as an employee’s record in a commercial payroll software package)
- records used in order to complete any form P11Ds you’ve filed for benefits in kind and expenses
- any additional NICs paid for the year, like Class 1A NICs
- pension payments
- statutory payments – these are Statutory Sick Pay, Statutory Maternity Pay, Statutory Adoption Pay and Statutory Paternity Pay – read the next two sections on this page for more details
- leave and sickness absences, overtime, commission and bonuses
- the value of benefits and expenses payments
- payments you’ve made to HMRC – or recoveries you’ve claimed.
For how long?
You must keep the records for the current and previous three tax years.
This memorandum is for guidance only and professional advice should be obtained before acting on any information contained herein as no responsibility can be accepted by CV Retail Limited for loss occasioned to any person as a result of action taken or refrained from in consequence of its contents.