886 Obligation to keep certain records

Summary

Every person who —

• on his/her own behalf or on behalf of another person, carries on or exercises any trade, profession or other activity the profits or gains of which are chargeable to tax under Schedule D,
• is chargeable to tax under Schedule D or E in respect of any other source of income, or
• is chargeable to capital gains tax in respect of chargeable gains,

must keep proper books and records so that correct returns of income may be made.

Details

(1) “linking documents” are documents prepared as part of the process of making up accounts and which show details of the calculations by means of which the books of the business may be connected to the professionally prepared accounts.

The definition of “records” is quite broad – it includes accounts, books of account, documents or any other data maintained manually or by electronic, photographic or other process, relating to —

• all sums of money spent and received in the course of carrying on a trade, profession or other activity and the purpose of such receipts and expenditure,
• all sales and purchases of goods and services where the carrying on of a trade, profession or other activity involves the purchase or sale of goods or services,
• the assets and liabilities of such trade, profession or other activity,
• the acquisition and disposal of assets which would be chargeable assets for capital gains tax purposes.

(2) Every person who —

• on his/her own behalf or on behalf of another person carries on a trade, profession or other activity the profits or gains of which are chargeable to tax under Schedule D,
• is chargeable to tax under Schedule D or F in respect of any other income, or
• is chargeable to capital gains in respect of chargeable gains,

is obliged to keep all records that are required to ensure a full and detailed tax return in respect of income tax, corporation tax and capital gains tax can be made. Also covered is the situation where the required records are kept on the taxpayer’s behalf. In such cases the ultimate responsibility for record-keeping remains that of the taxpayer.

Without prejudice to the generality of paragraph (a) and subsection (4), records include records and linking documents relating to any allowance, deduction, relief or credit (a relevant amount) taken into account in calculating the amount of tax payable for a year of assessment or accounting period. Transactions acts or operation giving rise to a relevant amount shall be treated as taking place at the end of the year of assessment or accounting period in which the relevant amount was taken into account in computing the amount of tax payable. Where subsection (4)(a)(ii) applies the transactions acts or operation giving rise to a relevant amount shall be treated as taking place at the end of the year of assessment or accounting period in which the return was delivered.

Not alone must linking documents (for example, the nominal ledger) be kept, the section also requires that the records be kept on a continuous and consistent basis so that they will not, for example, be written from memory retrospectively or selectively. The expression “on a continuous and consistent basis” is also used in section 202(2) of the Companies Act, 1990.

The precedent partner in a partnership is to be the person who is responsible in relation to record-keeping requirements.

(3) The records are to be kept in written form, in either Irish or English or, if not in written form, in the form usually encountered in relation to computer-based accounting systems. The wording, apart from the reference to computer-type records, is taken from section 202(7) of the Companies Act, 1990.

(4) The records must be kept for a period of 6 years, or —

• a greater period if the person has failed to make a return of income [in which case the time limit expires 6 years after the end of the year in which the return is made]. This is in line with Self Assessment rules and ensures that the period for retention of accounts runs from the end of the year of assessment in which the tax return is actually delivered to Revenue.
• where a transaction, act or operation is the subject of a investigation, inquiry, claim, assessment, appeal or proceedings which has already commenced, until such time as the investigation, inquiry, claim, assessment, appeal or proceedings has been concluded.

Where a person has an obligation either, on their own behalf or on behalf of another person, to maintain books or records in respect of a trade profession or other activity, this obligation subsists for periods up to 5 years from the date of cessation of the trade business or other activity.

(4A) The liquidator is responsible for keeping records in the case of a winding up of a company by a liquidator, and the directors are responsible for keeping records in the case of a company being dissolved, where no liquidator is appointed.

(4B) An executor or administrator of a deceased person shall also retain records for the required periods.

(5) A penalty of €3,000 applies for non-compliance with the section but this is waived where no person is chargeable to tax in respect of the particular profits for the relevant year.

Relevant Date: Finance Act 2021