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Cover Yourself for a Tax Investigation

Tuesday, 4th August, 2015

Regardless of whether or not your accounts are in perfect order, you may be one of the people HM Revenue & Customs randomly selects each year for a tax investigation.

If your accounts contain obvious mistakes or something that doesn't look right there is a pretty good chance HM Revenue & Customs will single you out for investigation.

The costs of an investigation in terms of your accountant's fees can be high, so it makes sense to ensure your accounts are as well prepared as possible.

Keeping Your Records in Order
It is a legal requirement to keep sufficient accounting records to explain the entries on your self-assessment tax return or your company's tax return. Keeping proper records will make it easier for your accountant to complete your return, thereby saving you money on accountancy fees. Equally important, if you are one of the unfortunate landlords selected for an enquiry by HMRC, then good accounting records will enable them to bring it to a speedy conclusion, saving you time, money and sleepless nights.

You will need to maintain records showing the dates and amounts of all your receipts, keeping tenant deposits and meter receipts separate from the rents. You also need to keep details of the dates and amounts of all items of allowable expenditure and capital payments. All invoices to support the amounts paid should be kept separately. Administration time can be saved by paying bills immediately so that you do not have any creditors. Write "paid" with the date on the invoice and then file it away. You should also keep records of your mileage for all journeys connected with your property letting business.

How Long to Keep Your Records
You must retain your records for a period of 5 years from the last date of submission of your Self-Assessment Return. For the year ending on 5th April 2015, the last date for submission of your return is 31 January 2016 and the records must be retained until 31 January 2021. Completion statements for the purchase and sale of properties should be retained for six years from the end of the tax year in which the property is sold in case HMRC enquire into capital gains.


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