How Long Should You Keep Your Books And Records?

How long should individuals and businesses hold onto their books and records? Ron Sciannella CPA, CA, CMA, LPA, CBV of Millard’s Chartered Professional Accountants says that it depends on the nature of the records and the status of the company.

Ron Sciannella
CPA, CA, CMA, LPA, CBV, Partner
Millard’s Chartered Professional Accountants

“Well it depends if you’re talking about tax returns and their supporting documents or if you’re referring to a corporation’s permanent or nonpermanent records”

With regard to tax returns, Sciannella suggests that while the CRA requires you to keep records for six years, after the end of the taxation year to which they relate, it’s a good idea to hold your record for a seventh year to be safe.

“Many people and businesses use seven years as a guideline for their own filing since the six-year period starts at the end of the tax year to which the records relate. Adopting the seven year rule provides a safety margin and prevents accidental destruction leading to violation of the six year rule. It is important to remember that records for capital purchases should be kept for six years after their disposal and not the acquisition.”

Tax records include your returns and the supporting documentation used to prepare them such as expense receipts, T4s that record employment income and at-source deductions and receipts for charitable donations.

Keeping your tax records is important to support the information you have provided to the Canada Revenue Agency. The CRA website makes it clear that your record can be requested at any time during the six year period should your returns be reviewed.

“Even if you do not have to attach certain supporting documents to your return, or if you are filing your return electronically, keep them in case we select your return for review. We may request documents other than official receipts as proof of any deduction or credit you claimed, such as cancelled cheques or bank statements.”

While it is possible to request disposal of your records before the end of the six year period, Sciannella explains that it requires express permission.

“Individuals and businesses may request early destruction of tax records. The CRA requests a list of records to be destroyed and a reason for the request. You need to Complete form T137 or apply in writing to your tax services office to request early destruction.”

So what about the permanent and nonpermanent records of a corporation?

“A corporation’s permanent records includes Minutes of Directors’ and Shareholders’ Meetings, share registers, the general ledger, and any contracts or agreements necessary to understand the general ledger entries. Those records must be retained until two years after the corporation is dissolved.”

In the absence of an exception, a corporation’s non-permanent records must be retained for a period of six years after the end of the last taxation year to which they relate.

“For example, invoices for the purchases of capital assets must generally be kept for 6 years after they are disposed, not just 6 years after purchase. All non-permanent corporate records on hand at the date of dissolution must be retained for two years after the date of dissolution.”

Permanent records of an unincorporated business must be retained for six years after the end of the taxation year in which the business ceased while other records must be retained for six years after the end of the last taxation year to which they relate.”

“It is important to note that companies should periodically review internal controls and practices to ensure the permanent and nonpermanent records are retained for the appropriate length of time.”

Do you have unanswered questions about record keeping and the CRA? Contact a Millards Professional Chartered Accountants representative today.

Sciannella’s practice areas include business valuation services, litigation support, accounting, auditing and tax services for small and medium sized businesses.

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