We are often asked "What records is a corporation or individual taxpayer required to keep and for how long?".

Before answering that question, you need to determine all of the applicable federal and provincial statutes that require information to be retained for your particular business. Although not a complete list, some of the various statutes are:

• Income Tax Act (federal)
  
• Provincial income and capital tax legislation
  
• Employment Insurance Act
  
• Canada Pension Plan
  
• Provincial payroll taxes
  
• Provincial workers' compensation legislation
  
• Excise Tax Act (which includes GST)
  
• Provincial sales tax legislation
  
• Federal and provincial corporations Acts
  
• Employment standards legislation

Which Records Must be Kept?

Each of the various pieces of legislation have different requirements concerning which records must be retained and how long they must be retained. For instance, every person carrying on business in Canada and every person who is required to pay or collect taxes or other amounts by the Income Tax Act, Employment Insurance Act, Canada Pension Plan or the Excise Tax Act must keep books and records.

Under the Income Tax Act, a "person" includes not only individuals but also corporations and the heirs, executors, administrators or other legal representatives of such persons. For income tax purposes, a corporation, a charitable organization and a trust are each considered to be a person.

Certain books and records of a more permanent nature must be kept throughout the period the business or corporation is operating. These include items such as the general ledger and minutes of the directors of the corporation. Other documents must be retained for the period for which they are relevant to the computation of income tax payable. For example, documentation for the purchase of capital assets must be retained throughout the period the asset is owned and for a certain number of years after that time. This requirement also applies to records concerning the cost of marketable securities which must be held for a period of time after the sale of the securities.

Generally, the books and records should support the basis on which taxes payable, or the taxes or other amounts to be collected, withheld or deducted are determined. All transactions should be supported by vouchers and other source documents that verify the recorded data. If a person is found to have kept inadequate books and records, Revenue Canada may stipulate what records are to be maintained.

How Long Must Records be Kept?

The Income Tax Act requires that books and records, together with the related accounts and vouchers, must be retained for a minimum of six years from the end of the last taxation year to which they relate. The taxation year is the fiscal period for corporations and the calendar year for all others. Please note that other federal or provincial statutes may extend this time period for the same records.

Do any Special Circumstances Affect the Retaining of Records?

If a tax return is filed late, the corresponding books and records must be maintained for six years from the date the return is filed. Further, if a federal Notice of Objection is filed, every book and record necessary for dealing with the notice of objection or appeal must be retained until that process is completed.

Can Records be Destroyed at an Earlier Date than Required?

In some circumstances, a person may seek permission to destroy records at an earlier date than that prescribed by the Income Tax Act. The request must be made on Form T137, "Request for Destruction of Books and Records". To speed up the approval process, the applicant should review the completed form to ensure all of the required information has been provided. Please remember that even though Revenue Canada has given permission to destroy the records, permission may also be required under other legislation that requires those records.

What if the Business Closes?

The Income Tax Act provides that a non-incorporated entity ceasing business must retain certain records until six years after the end of the taxation year in which the business ceased.

Similarly, the Income Tax Act provides that a corporation that is dissolved must keep certain records until the day that is two years after the day the corporation is legally dissolved. This provision does not apply to corporations that are amalgamated with, or wound-up into, another corporation.

More Questions?

If you have questions regarding the period of retention or the appropriateness of your personal or company financial records, talk to Logan Katz LLP Chartered Accountants.

The above provides general information only. It should not be regarded or relied upon as accounting or taxation advice or opinions. Logan Katz LLP Chartered Accountants would be pleased to provide more information or specific advice on matters of interest to you.

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