Jeremy Tauri: IRD's seven-year rule could do with tweaking

Having to keep tax records for seven years can be tiresome.

Every year, our letters to our clients remind them to keep all their records for seven years.

Every year, it's met with surprise. "Do I really have to keep all my records for seven years?"

They ask me this like they hope the rule has changed.

Secretly, I hope it has too. Although we've moved to a paperless office and scan and store everything on the Cloud, I've calculated we still have more than 400,000 pieces of paper in storage.

But I could be telling clients to do a lot more than keep them for seven years. It could be "you must keep your records for 10 years", which the IRD can ask you to do.

Alternatively, it could read "please keep your records until the IRD audits you". But then you wouldn't sleep at night.

An audit or review is the primary reason you need to keep records - to verify your tax position.

But the rules on record keeping do take some strange turns.

These rules and anomalies could do with a tweak as part of the goal of reducing compliance costs for businesses.

When I think about the paper we still have and the boxes full of receipts, bank statements and invoices each business holds, I'm sure we'd all be happy for the IRD to store these on our behalf to view if and when they want to. For small businesses it's just an old box of transactional history.

Jeremy Tauri is an associate at Plus Chartered Accountants.