If you run your own business, you are required to retain books and records that relate to a specific taxation year for a minimum of six years after the end of that year. If a particular year is under appeal, books and records for that year should be kept until the appeal is resolved and the time for any further appeal has expired. If a return has been filed late, the records must be kept for six years from the actual filing date.
Records include minutes of meetings, accounting records, and source documents such as invoices, receipts, cheques, bank statements, etc. The books and records must be sufficient for the Canada Revenue Agency (CRA) to confirm revenue, expenses and taxes paid. They must also be stored at a Canadian location available for audit.
If you use a computerized record-keeping system, there is a requirement to maintain an electronic backup and there are penalties for failure to do so. In addition, any paper records that you retain must be legible in the future. This means that you may need to copy certain receipts and invoices on paper that will not fade. Also, it is important to keep the detailed original invoices, not just the credit card slip and the monthly credit card statement, to document the nature and amount of the expenses.
As records over six years old might contain information that is still relevant for tax purposes, you might wish to consult a Chartered Professional Accountant or the CRA prior to destroying your records. As well, you might need permission from other government departments before you may destroy records related to those departments’ activities.
For more information, refer to the CRA Information Circular 78-10R5, which you can find on the CRA website.