The records/receipts for an accounting period will generally have to be kept for six years from the end of that period. For example, if the accounting period ends 31 December 2020, the records must be kept until 31 December 2026. And If you send in your tax return late or subject to a compliance check, then the time limitation for keeping records may be extended.
Storing the paper receipts has been one of the more painful parts of managing a business. This is very time-consuming and cumbersome as well. But luckily, paper receipts are now becoming a thing of the past. So, the digital captures and storage of invoices and receipts are sufficient to satisfy legal and tax requirements in many European Union countries, including the United Kingdom.
Technology development and digitalised accounting
Digital technology influences the strategic and competitive aims of the company. Still, it also affects the business models, competitive advantages, and the company’s process of work and approach to the market. We should accept that digital technology has a significant influence on accounting information and management control systems. Rules and principles have been habitual for many years, and they do not change over time.
In other words, the accounting industry is evolving, and it changes. With the development of technology, the coverage of accountants’ activities is transforming, and client expectations are changing. The story of technology and digitalisation allows updates and changes in the accounting industry. The development of modern technology reduces the repetitive workload actions that existed in the environment of traditional methods.
Technological development is increasing competition force professions to change constantly. The accountancy profession is one of the top professions and will be most affected by technological developments. It is obvious that, with technological development, many digital systems that did not exist five years ago are now diligently used in the accountancy industry. In conclusion, the accounting profession is on the top of this list with a high probability of being automated and digitised shortly.
The paper system and accounting professionals will be affected by digitalisation. There is research based on the review of available relevant professional and academic literature which confirms this.
There are different reasons why accountants should go with online cloud based accounting. According to a study conducted by Wilson, factors can have a significant impact and motivate technological change. Among the UK accounting professionals are the need to meet prescribed deadlines for accounting tasks and the significance of providing better and timely information to different users and the government.
Furthermore, using technology will improve the quality and relevance of the accounting information, the period needed for preparation and knowledge will be available on time without delay. With accounting processes becoming automated, accountants are becoming more associative to their clients and are increasing their advisory facilities when it comes to daily operations.
“Automation does not necessarily mean a cut back in jobs but rather often permits for human labour to be employed for more relevant purposes. We introduced an automated system, but we did not reduce any employee numbers. Instead of primarily creating figures by hand, the employees now check and explain the figures. This is much more important and also more interesting for the employees.”
Time to dispose of paper bills and start maintaining digital receipts
Customarily, businesses have been legally required to collect and store physical paper copies of customer invoices and receipts for expenses. Now, we’re happy to report that it is changing; that the government is accepting the digitalised receipt. So, this is time to say goodbye to all the paper receipts.
On 17 April 2018, HMRC has confirmed that digital receipts fulfil legal and taxation requirements for businesses.
Why do you have to keep receipts/records?
If HMRC needs to check your tax return for any reason and you cannot show them the records that you used to finalise the return, you may have to pay the penalty.
Keeping your receipts/records on computer
You can keep your receipts/records on a computer or use any storage tool such as CD-ROM, USB memory stick, or a mapped drive. Make sure you have the receipt/records captures of all the information (front and back).
What must you do if you lost or destroyed your receipts/records?
If your records are lost or demolished and can’t replace them, we must inform HMRC what has taken place and do your best to recreate them. Once you’ve gathered replacement information, you can provide us with this to complete your tax return. We could inform HMRC if any provisional figures were used in satisfying the tax return. But if we adjust later and you’ve not paid enough tax, you may have to pay interest and penalties.
5 Steps to Convert Paper Files to Digital
- Scrap the small stuff
- Manage bills
- Scan and save
- Get organised
- Backup and store
How long should you keep the receipts/records?
Documents to keep forever
- Marriage/birth/death certificates
- House deeds
- Extended warranties
- Rental agreements
- Vehicle documents
- Driving license
Documents to keep for seven years
- Tax returns
- Tax-related receipts and cancelled checks
- Records for any tax deductions you took
- Other tax records
Documents to keep for six years
- Copies of customer invoices and receipts for expenses
Documents to keep for two years
- Tax record (including the P60, any notices from HMRC and proof of interest paid, proof of dividend paid)
Documents to keep for one year
- Bank statements
- Credit card statements (once paid)
- Pay stubs
- Medical bills (once paid and free of insurance disputes)
- Utility bills
- TV license
How do you dispose of documents?
Shred your documents that you’re about to throw out as much as possible, as the document might contain a lot of personal information. If you want to put away the trash, you can enrol for online billing for the possible ones. Ex: utilities.
This makes it easier for you to pull out information should you need them, and you don’t have to distress about tidying up the paperwork.