Digital records: The trail ends for paper

iStock_nico menijes_Digital records

Digital record keeping is perfectly acceptable when the HMRC comes knocking, with the tax authority deploying no hard and fast rules on format, according to Paperless Europe.

The nostalgic comfort of paper may feel better when HMRC wants to view your records, but according to HMRC’s official guidance for companies and directors on record keeping, there are “no rules on how you must keep records. You can keep them on paper, digitally or as part of a software program (like book-keeping software)”.

There is one major caveat, of course: “As long as the documents are readable, you can keep them in either digital or paper - neither is more valuable than the other,” explains Diogo Cavazzini, product executive at Paperless Europe.

In the tax authority’s own words, “HMRC can charge you a penalty if your records aren’t accurate, complete and readable”. HMRC’s main concern is the legibility and availability of the document or documents in question.

According to Cavazzini, HMRC’s acceptance of digital records is still a question Paperless Europe receives on a daily basis. “How you decide to keep your records is up to you,” he said. “But it’s important to make it clear that HMRC has an official comment on their website about digital record keeping. It’s completely accepted by HMRC - and, if anything, it’s more accurate than keeping paper files.” As a helpful guide, HMRC has a list of digital record keeping suppliers which it recommends. 

Digital records come with the added benefit of being searchable. Paperless, for instance, has what it calls an “accounting archive”. “The data is accessible from your accounting software,” explains Cavazzini. “There’s no need to trawl through paper records.”

The bigger question with digital record keeping isn’t HMRC’s approval, but where and how your data will be kept if the system is cloud based. “Does my provider respect EU law?” is an important question you need to ask. The EU has very strict laws on data, so if a company conforms you can be fairly certain that you’re documents are safe.

But as far as the tax authority is concerned, concludes Cavazzini, "HMRC has no preference”.

Text by Francois Badenhorst from AccountingWeb.co.uk 

Follow the link to read the article from the original source: http://www.accountingweb.co.uk/article/digital-records-trail-ends-paper/595623