Keeping detailed financial records used to be a pleasure reserved for accountants and the self-employed, but under the new system of self-assessment, which took effect at the start of this tax year, employees need to keep records as well.
An estimated five million employees receive a tax return each year - mostly those who pay tax at the 40 per cent rate or receive benefits from their employer. They are sent automatically to any company director. In the past, they could scribble something like "as per P11d" on the return, which tells the Revenue to get a lot of the information it needs from your employer. But under self-assessment the taxpayer is legally responsible for the accuracy of the information on the tax return. You cannot rely on your employer and have to keep a record of everything yourself. And you have to do it by law.
Technically, everybody in the country should be keeping records. The fact that you have never filled in a tax return does not imply that you did not need to fill one in and will not have to in future - any undeclared income kicking around? The Revenue also sends some out each year purely at random. If you get one in the post, you have to fill it in.
So what do you need to record? The Revenue is vague on that one. Its guidance says: "You should keep any information and documents that you have received, or have prepared, that may be needed to help you fill in your tax return or claim."
In general, the Revenue says you should keep any information you get from your employer about pay and bonuses, tax you have paid, any benefits in kind, reimbursed expenses, and you should start making your own records on top of keeping information you are given. If you are one of the two million taxpayers driving a company car, for example, you will need to keep a log of how far you have travelled on company business and when you made the trip. If your firm pays any expenses, you must have your own copy of any receipts, credit card statements or other proof that you actually spent the money.
If you do not have a receipt for an expense, maybe because it was a small cash payment or because you had to give the receipt to your employer, the Revenue says you should make a note as soon as you can detailing how much you spent, when you spent it and what it was for.
In all cases you may be required to prove that any expenses you incur or miles you run up in your company car are for business purposes Otherwise you may be taxed on them. "This is not just a technical requirement," says Andrew Burgess, national tax partner at accountants Neville Russell. "You have to keep these records and you should have been doing so for the last five months."
Maurice Fitzpatrick, tax consultant at accountants Chantrey Vellacott, says that if company car drivers keep a log of business miles for the rest of the year, they should be able to persuade the Revenue to extrapolate the figures for the full year. Your employer should have been keeping the receipts for any expenses you have claimed and should provide them for you if you ask. If they will not, the Inland Revenue office which handles your tax affairs can approach the employer on your behalf.
If your records are still not up to scratch when you sit down to fill in your tax return next year, the Inland Revenue has said it will take a common-sense view and "give the taxpayer the benefit of the doubt where it is reasonable to do so".
But accountants remain concerned. "The legislation is not specific," says Jonathan Bruce, a national tax manager with accountants Ernst & Young. "It just says that an employee will have to keep all of the records necessary to make and deliver a correct and complete tax return.
"If you claim that you are a single parent, that you are married, or that you do 3,000 business miles a year in your company car, you need to be able to back that up"nReuse content