What Are the Differences Between Accounts and PAYE Records

| General

What Are the Differences Between Accounts and PAYE Records?

Many ordinary folk are often bamboozled by financial terms and are often unaware how long they should be maintaining such records. This article aims to clarify this and seeks to guide the unwary through a minefield.

It’s Just A Matter Of Timing

Timing is the main issue when advising a client on the differences between the documents to be maintained for recording PAYE, Accounting and tax transactions. The legal time-limits for archiving the respective records are administered through HMRC. The article will discuss PAYE records first, accounting transaction secondly and will latterly discuss the tax liability.

How Long Should Accounting Records Be Kept And What Should The Format Be?

Affected businesses are obliged to maintain a record of Value Added Tax transactions for six years. The guidance for the maintenance of such Accounting Records include:

  • bank accounts statements
  • invoice documents
  • cash transaction records
  • paper-rolls from a till and
  • evidence of cheques.

The law in this area makes clear that records can be maintained:

  • in paper format,
  • electronically or
  • baked into a software programme.

In stark contrast to Accounting Records, which need to be held for six-years, PAYE documents need maintaining for half this time and for three years after the tax year completes.

Records relating to PAYE include:

  • external payments to HMRC
  • the receipt of benefits
  • tax-codes
  • monies deducted from staff
  • leave
  • sickness absences and
  • payments made to the workforce

Requirements For Tax Returns Are The Same…Right?

Contrary to popular belief, the time-limits for maintaining records and information contained in Tax-Returns contrast with Accounting Records and PAYE. In stark contrast to the three-year time-limit for PAYE and six-year time-limits for VAT, affected businesses are obliged to maintain tax-returns for twenty-two months after the tax-year. For the avoidance of doubt this implies that the tax-return document is to be submitted before 31st January of the respective tax year.

What If The Business Submits A Tax Return Late?

There could be numerous reasons why a business may be late in submitting a tax-return. In the event of a tax return being filed outside the respective legally required deadlines the party failing to comply will be under a legal obligation to maintain the records of respective tax returns for one year and a quarter following the date for filing.

What Documents Need To Be Maintained For Tax Return Purposes?

For Tax Return purposes some records which need keeping include:

  • dividend
  • evidence of income and expenditure
  • financial statements
  • P11D, P45 and P60
  • state benefits received and

What About Tax on Chargeable Gains?

Capital Gains are often overlooked by businesses. The best advice is to maintain the documents linked to the initial payment and evidence of action taken improve the property such as invoices. This time-limit is identical for tax returns and need maintaining until the property is disposed of and for 22 months following the termination of the tax year in which the disposal is made.

Lessons Learned?

Lawyer should be advising their clients to:

  • be clear on which time limit applies to the particular issue
  • communicating with their clients the:
  • twenty-two month time period after the end of the respective tax year for Tax Returns
  • thirty-six month time period for VAT Transactions and the
  • seventy-two month duration for maintaining Accounting documents and
  • keeping the correct documents in the required format.

This will ensure clients are complying with the legally required time limits, will know what documents they are obliged to maintain and will ensure they are legally compliant. This will also ensure persons occupying the position of director are not finding themselves struck off by the Registrar of Companies.

The Legists Content Team


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[1] Dent, Alex – How long do I have to keep my accounting records for? - 29 June 2022 – Saint & Co Chartered Accountants - How long do I have to keep my accounting records for? - Saint

[2] Her Majesty’s Revenue and Customs – Running a limited company: your responsibilities – Running a limited company: your responsibilities: Company and accounting records - GOV.UK (www.gov.uk)

[3] Her Majesty’s Revenue and Customs – Tax compliance checks - Tax compliance checks - GOV.UK (www.gov.uk)



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