If you are self-employed as a sole trader or as a partner in a business partnership, then you must keep suitable business records as well as separate personal records of your income. 

For tax purposes, the business records must be held for at least 5 years from the 31 January submission deadline for the relevant tax year. For example, for the 2019-20 tax year where online filing was due by 31 January 2021, you must keep your records until at least the end of January 2026. In certain situations, such as when a return is submitted late, the records must be held for longer. 

If you are self-employed you should also keep a record of:

• all sales and income
• all business expenses
• VAT records if you’re registered for VAT
• PAYE records if you employ people
• records about your personal income
• grant details if you claimed through the Self-Employment Income Support Scheme because of coronavirus

You don't need to keep the vast majority of your records in their original form. If you prefer, you can keep a copy of most of them in an alternative format, as long as they can be recovered in a readable and uncorrupted format. For example, a scanned PDF document. 

If your records are no longer available for any reason, you must try and recreate them letting HMRC know if the figures are estimated or provisional. There are penalties for failing to keep proper records or for keeping inaccurate records. 

The tax treatment of charities can be complex. Many charities trade either as part of their charitable interests or to raise funds. As a first step, any charity hoping to benefit from any beneficial tax treatment needs to be recognised as a charity for UK tax purposes by HMRC as well as meeting other criteria.

A charity will not pay tax on profits it makes from trade if:

• they are making money to help their charity’s aims and objectives, known as ‘primary purpose trading’
• their level of trade that is not primary purpose falls below the charity’s small trading tax exemption limit
• they trade through a subsidiary trading company

The charity must pay tax on any other profits.

The small trading tax exemption limits are as follows:

Charity’s gross annual income	Maximum permitted small trading turnover
Under £32,000	£8,000
£32,001 to £320,000	25% of your charity’s total annual turnover
Over £320,000	£80,000

If the charity’s small trading turnover is higher than the exemption limits, then they are required to pay tax on all of their profits from that trade.

HMRC’s new points-based penalty regime for late submission and payment will start from 1 April 2022. The changes will apply in the first instance to the submission of VAT returns for VAT return periods beginning on or after 1 April 2022. 

The penalty regime will then be extended to Making Tax Digital (MTD) Income Tax Self-Assessment (ITSA) accounting periods beginning on or after 6 April 2023. This will be in tandem with the extension of MTD (from the same date) for taxpayers with business or property income over £10,000 annually. The penalty scheme will be extended to all other ITSA taxpayers for accounting periods beginning on or after for 6 April 2024.

Under the new regime, taxpayers will incur a penalty point for each missed submission deadline. At a certain threshold of points, a financial penalty of £200 will be charged and the taxpayer will be notified. The threshold varies depending on the required submission frequency (monthly, quarterly, annual). The penalty points will apply separately to VAT and ITSA. The penalty points will be reset to zero following a period of compliance by the taxpayer. There are also time limits after which a point cannot be levied. 

In addition, the new system will see the introduction of two new late payment penalties. A first penalty of 2% of the unpaid tax that remains outstanding 15 days after the due date. The penalty increases to 4% of any tax still outstanding after 30 days. An additional or second penalty at a penalty rate of 4% per annum will accrue on a daily basis after 30 days. This additional penalty will stop accruing when the taxpayer pays the tax that is due.

There will be an appeals mechanism for both the late submission and late payment penalties available through an internal HMRC review process and an appeal to the First Tier Tax Tribunal.

One of the main areas to consider in deciding how to treat a deductible expense is whether the cost is revenue or capital in nature. There is no single, simple test that can be applied to decide which items are capital expenditure and which are revenue. This can only be determined by reference to the relevant facts that applied at the time the expenditure was incurred. Capital expenditure cannot be deducted in computing profits, however there are separate reliefs for some capital expenditure.

How would this capital/revenue split apply to the costs of setting up a website?

HMRC's internal guidance says that the costs of bringing an asset into existence or that has an enduring benefit to the trade are capital. Therefore, the regular update costs of the site are likely to be revenue expenses and the original cost of creation, capital.

HMRC’s manuals go on to state an interesting view that, 'the cost of a web site is analogous to that of a shop window. The cost of constructing the window is capital; the cost of changing the display from time to time is revenue'.

There are important rules that all businesses must follow to keep business and accounting records accessible if requested by HMRC. The exact documentation that must be held and the time limits for doing so can vary significantly. For example, most company records must be held for at least 6 years from the end of the last company financial year they relate to and even longer in some circumstances. Significant penalties can be imposed for failing to keep records or if records are inadequate.

These record keeping requirement include international trade documents.

HMRC publishes specific guidance concerning archiving international trade documents. This includes ensuring that your records are up to date and accurate, are legible, readily accessible and available for inspection at all reasonable times.

HRMC’s guidance states that the archiving period for your records will vary according to the individual procedure. However, in the event of a criminal investigation, traders’ records dating back ten years may be used as evidence. Accordingly, you may decide to retain documents for that length of time. After the date of entry, you can keep your records on a computer.

If these record keeping requirements cause storage issues or undue expense, then HMRC may allow you to reduce the length of time for storing documents.