A LAW firm says businesses must exercise caution when getting rid of historic paperwork after a landmark ruling.

Latimer Hinks Solicitors, in Darlington, has highlighted rules over businesses’ legal requirement to retain documents going back six years.

It referred to the case of Whitefields Golf Club Ltd and others versus HMRC, over a routine VAT inspection after a restructuring of the golf club’s activities, which ruled Whitefields had to supply copy documents to HMRC.

This was despite handing the documentation over in 2004, which HMRC had since lost or destroyed.

The ruling, which determined the conduct of HMRC wasn’t relevant in this case, said it was reasonable for HMRC to demand copies of certain documents that taxpayers had already provided eight years earlier.

The investigation resumed in 2011 following another VAT inspection in 2010 and, despite Whitefields arguing it would be unreasonable to provide the documentation again after it had been lost, the tribunal ruled in HMRC’s favour.

Elizabeth Armstrong, Latimer Hinks’ partner in the private client department, said: “This is a challenge for both business and individual taxpayers, as it suggests that HMRC can go back as far as they want for information.

“We are all comfortable with the six-year rule, so it will probably be a little while before we know how it will be interpreted.”

HMRC’s request was made under paragraph 1 of Schedule 36 to the Finance Act 2008, which gives officers of HMRC powers to obtain information and documents.

However, the Tribunal did say HMRC can only require a person to produce a document if it is in that person’s possession or power.

Ms Armstrong added: “As a result of the ruling, it would be wise for businesses to remain cautious when discarding documents, regardless of how long ago they were drafted.”