4. Keeping records
You must collect and keep records of:
- what you pay your employees and the deductions you make
- reports and payments you make to HM Revenue and Customs (HMRC)
- employee leave and sickness absences
- tax code notices
- taxable expenses or benefits
- Payroll Giving Scheme documents, including the agency contract and employee authorisation forms
Your records must show you’ve reported accurately, and you need to keep them for 3 years from the end of the tax year they relate to. HMRC may check your records to make sure you’re paying the right amount of tax.
If you don’t keep full records, HMRC may estimate what you have to pay and charge you a penalty of up to £3,000.
If your records are lost, stolen or destroyed
Tell HMRC as soon as possible if you don’t have records and can’t replace them. You must also do your best to recreate them - HMRC may be able to help if you’re not sure how much you paid your employees.
You must tell HMRC if your final payroll report of the tax year includes figures that are:
- estimated - that you want HMRC to accept as final
- provisional - that you’ll update later with actual figures
You must follow rules on data protection if your business stores or uses personal information.