KEEPING RECORDS

A presentation to the
Uganda Law Society by
Uganda Revenue Authority

1 Uganda Revenue Authority 3/10/2010

 Key Legislation
 The Income Tax Act cap, 340;
 The Value Added Tax Act, cap.349;
 The Advocates Act, cap.267 As Amended
 The Magistrates Courts Act, Cap. 16
 The Police Act, Cap. 303

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 What is record keeping?
 Recordkeeping can be described as a systematic compilation of
similar information in an office setting, and stored in files/folders
for the purpose of office administration.

 This whole idea about record keeping and the word ―keep‖ means
to make and retain. Records are generally created in the normal
course of business and business operators are expected to retain
them;
 Sometimes due to the nature of business records, they are not
produced immediately but a contemporaneous record is required
to satisfy business operators‘ substantiation requirements.

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 Why keep Records? Records….
 Assist in preparation of financial statements quickly &
accurately;
 Provide information to enable control of cash in the
business;
 Provides management information for business
decisions;
 Contributes to assessing business financial situation at
any time;
 Keep track of staff costs & performance;

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 Why cont….
 Help in measurement of performance against
projections;
 Highlights quickly areas where problems could arise &
enable remedies to be put in place;
 Assist in providing information required by bankers;
 Help in detecting thefts within the business itself;
 Help fulfill the obligations imposed by Tax legislation;
 Assist in calculating how much tax you have to pay & to
check your tax position accurately;

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 Why Cont…..
 you can avoid headaches at tax time & avoid paying too
much tax in form of interest & penalties( right tax at the
right time);
 Makes filling in your tax return easier and quicker;
 Keeping well-organized records also ensures you can
answer questions if your return is selected for
examination or prepare a response if you are assessed for
additional tax.

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 How will it benefit your business?
Records will reveal….
 Income generated & how much you expect in future;
 How much you owe for goods, rent or other expenses;
 How much cash is at hand & how much is tied up eg. In stocks;
 Your gross & net profit;
 How your financial situation compares with last year;
 What is owing to you & for how long;
 What your actual expenses are compared to what you estimated;

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 Principles of a Good record keeping
Program!
 Accountability: Responsibility and auditability;
 Integrity: Authenticity & reliability;
 Protection: Private, confidential, secret or essential to business
continuity;
 Compliance: applicable laws and other binding authorities, as well as
the organization‘s policies;
 Availability: ensures timely, efficient, and accurate retrieval of needed
information;
 Retention: appropriate time, taking into account legal, regulatory, fiscal,
operational, and historical requirements;
 Disposition : records that are no longer required to be maintained by
applicable laws and the organization‘s policies;
 Transparency : documented in an understandable manner and be
available to all personnel and appropriate interested parties.

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 Sources of Record Keeping
requirements.
 Legal Requirements : Tax legislation, Advocates Act, etc
 Business needs: Past dealings with clients, for ready
reference etc;
 Community expectations:

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 What Records should I keep?
 Records are impartial participants in business & social
activity.
 To a legal practitioner, records could be:
 court record of litigation;
 records of evidential value;
 Continuous professional Development( CPD or CLE);
 Clients‘ accounts etc ( important also for taxman)
 Records relating to the practitioner‘s income and
expenditure.

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 Tax Records Required
 It is mandatory for every taxpayer without exception to keep
records in the English language necessary to determine one‘s
tax liability.
 The Income Tax Act, cap.340.(ITA)
- S.129(1)ITA provides that
―unless otherwise by the commissioner, a taxpayer shall maintain
in Uganda such records as may be necessary to explain the
information provided in a return or in any other document
furnished in terms of S.92 or to enable an accurate
determination of the tax payable by the taxpayer”

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 TAX Records cont….
Note the two(2) reasons above:
I. To explain the information provided in a return submitted
under S. 92 ITA.
The relevant provision is S.92(5) which provides that ―A
taxpayer carrying on business shall furnish with the
taxpayers return of income a statement of income and
expenditure and a statement of assets and liabilities.”
ii. To enable accurate determination of the tax
payable by the taxpayer with the ability to vouch
for the declarations made in the statements of
income and expenditure and the balance sheet.

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 Tax Records cont….
 Under the ITA, it is not specified what kind or in what form
the records ought to be kept as long as the records are
sufficient to vouch for the declarations appurtenant to the
return of income.
 There is specificity under the ITA as regards Withholding Tax
Records ie. Payments made to the payee & tax withheld there
from; S.126(1) ITA
 What is emphasized under S.40(1) ITA is that the taxpayer‘s
accounting method should conform to the generally accepted
accounting principles(GAAPs).

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 Tax Records cont….
 The Value Added Tax Act, cap.349 (VATA)
o This Act specifies in succinct terms the records required to
be kept by a taxable person S.46(1) VATA: These are:
a) Original tax invoices, copy tax invoices, credit notes, and
debit notes received by the person;
b) A copy of all tax invoices( your fee notes), credit notes and
debit notes issued by the person;
c) Customs documentation relating to imports & exports by
the person;
d) Such other accounts and records as my be prescribed by
the Commissioner General.

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 Tax Records Generally Include..
 Gross receipts: Cash register tapes, bank deposit slips,
receipt books, invoices, etc ;
 Proof of purchases: Canceled checks, cash register tape
receipts;
 Expense documents: Canceled checks, cash register tapes,
account statements, sales slips, invoices and petty cash slips
for small cash payments;
 Documents to verify your assets: Purchase and sales
invoices, real estate closing statements and canceled checks;

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 …. Records Generally cont....
 For Partnerships or Sole practitioners, the following
records should be kept:
 A current list of the names and addresses of the partners;
 A copy of the initial deed of partnership and all amendments;
 A copy of any conversion or merger agreement;

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 …. Records Generally cont....
 A record of contributions;
 Employment contracts & Records relating to tax deductions,
bonus etc;
 Records relating to Clients Accounts & the underlying
transactions; ( the URA may require that these accounts are
laid bare to ensure that these accounts are not used as ‗safe
havens‘ for hiding income earned).

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 ACCESS TO RECORDS
 The Commissioner General has unlimited and unfettered
access to any records, books and computers of any taxpayer.
 To this end the principle of confidentiality in inoperative to
the extent of use of any records in the taxpayer‘s possession
for purposes of determining the taxpayer‘s tax liability.

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 Access cont….Statutory power
 S.131 ITA & S. 47 VATA are coined in more less similar
fashion in respect to access to records.
 S.131(1) provides that ― In order to enforce a provision of
this Act, the commissioner, or any officer authorised in
writing by the commissioner –
a) Shall have at all times full and without prior notice full and
free access to any premises, place book, record, or
computer;
b) May make an extract or copy from any book, record …

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 …. Statutory power cont….
C) May seize any book or record that, in the opinion of the
commissioner affords evidence which may be material in
determining the liability…..
 Note that under S.131(7) it is provided that ― This section
has effect not withstanding any rule of law relating to
privilege or the public interest in relation to production of
or access to documents.

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 ….Statutory power cont….
 S.47(1)(a) VATA has a small variation from S.131(1)(a) ITA
in that it introduces a phrase ‗shall have at all times during
normal working hours…full and free access…‘
 Ponder! What happens if the commissioner proceeds to
access records under s.131 ITA( any time outside normal
working hours) and the same records are of material
relevance for a VAT assessment?Would the taxpayer contend
that VAT is not assessable because Information was irregularly
obtained? I do not think so!

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 …Statutory power cont…
 To insulate against such rigidities, the Commissioner has
resorted to securing search warrants against taxpayers under
the Magistrates Courts Act( S.70,71,& 73) & The Police Act
(s.27 & 29).
 And because such searches could have criminal connotations
and may lead to prosecution of the taxpayer.

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 For How long Should records be
kept?
 Taxpayers should keep books and records for as long as they
may become material in tax matters:
 Under the ITA, the taxpayer must keep records for a
minimum of five(5) years after the person prepared or
obtained them or five years after the end of the year of
income to which the record or evidence relates S.129(3)
ITA;
 Under the VATA, records shall be retained for at least six
years after the end of the tax period to which they relate
S.46(2) VATA.

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 How Long Cont….
 For Withholding tax Records, the ITA provides that the
withholding agent keeps the records for 5 years after the year
of income to which the records relate; S.126(2) ITA.
 Where fraud or evasion is involved the URA will want to go
back to the source records which means that they can go
back to the date of the non-complying conduct whenever that
was.
 Note : Because the statute of limitations never runs if no
return is filed, any proof of income & expenditure should be
retained forever.

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 What happens if I don't keep proper
records?
 We want you to pay only as much tax as you owe.
 However, if you can't show sufficient evidence of your
income and outgoings, you could end up paying more tax
than you should.
 If you do not maintain good records, you might not be able
to render your VAT return on time and this can result in a
surcharge

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 What Happens cont….?
 Wherever possible, we will give you the benefit of the doubt, but
don't forget there are penalties for failing to keep proper records
to back up a tax return or claim. Under the VAT Act, S.55 thereof,
 A person who fails to maintain proper records under this Act
commits an offence and is liable on conviction to—
 (a) where the failure was deliberate or reckless, a fine not
exceeding five hundred thousand shillings or to imprisonment for
a term not exceeding two years or to both; or
 (b) in any other case, a fine not exceeding three hundred thousand
shillings or to imprisonment for a term not exceeding six months
or to both.

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 What Happens cont….?
 Further, the VAT Act, S.65(5) provides that:

―A person who fails to maintain proper records in a tax period

in accordance with the requirements of this Act is liable for a
penal tax equal to double the amount of tax payable by the
person for the tax period.‖

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 What Happens cont….
 There are similar penal Provisions under the ITA as there are
under the VAT Act for failure to maintain proper records:
 S.139 ITA provides: ―A person who fails to maintain proper
records under this Act commits an offence and is liable on
conviction to –
(a) where the failure was deliberate, a fine of not less than
fifteen currency points or to imprisonment for a term not
exceeding one year; or
(b) in any other case, a fine not exceeding twenty-five
currency points.

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 What Happens cont….
 Further, S.152 ITA provides:

―A person who deliberately fails to maintain proper records for

a year in accordance with the requirements of this Act is
liable to pay a penal tax equal to double the amount of tax
payable by the person for that year.‖

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 What Happens cont….
 The ‗beauty‘ in either Act is that the Prosecutorial &
Administrative penal provisions are mutually exclusive;
Thus:
 Under S.66(3) & (4) VAT Act,
‗No penal tax is payable under Section 65 where the person has
been convicted of an offence under Section 51, 55, or 59 in
respect of the same act or omission.‘

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 What Happens cont….
 And under subsection (4) ,
‗If a penal tax under Section 65 has been paid and the
Commissioner General institutes a prosecution proceeding
under Section 51, 55 or 59 in respect of the same act or
omission, the Commissioner General shall refund the amount
of penal tax paid; and that penal tax is not payable unless the
prosecution is withdrawn.‘

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 What Happens cont….
 Similarly under the ITA, S.155(3) & (4) provide:
 ‗No penal tax is imposed on a person under Section 152 …
where the person has been convicted of an offence under
Section 139 … for the same act or omission.‘
 ‗If penal tax under Section 152 … has been paid and the
Commissioner institutes a prosecution proceeding under
Section 139… in respect of the same act or omission, the
Commissioner shall refund the amount of penal tax paid; and
that penal tax is not payable unless the prosecution is
withdrawn.‘

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 What Happens - Efficacy
 Efficacy of the above provisions largely not tested by URA.

 Not because URA is not aware about their existence;

 Need to apply these provisions ferociously to foster

compliance.

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 Further Consequences
 Generally taxes are all about income, deductions and
substantiation.
 One of the areas where taxpayers are substantially at risk
is record keeping and substantiation for claims made for
deductions.
 Default on the part of the taxpayer may further lead to:

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 Consequences cont…
 Increased exposure to the risk of URA AUDITS;
 Adverse outcomes ; ( already enumerated in the penal
provisions especially the monetary costs & time );
 Higher than average compliance costs;
 Liquidity & cash flow problems;
 Avoid subjective assessments to tax; eg. Presumptive or
betterment of assets.

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 Burden of proof
 It is important to note that a taxpayer bears an evidential burden
in relation to matters of proving that a given assessment is
excessive;
 Essentially the content of what is recorded will depend upon
individual circumstances;
 BUT it needs to be adequate to ensure that any URA officer with
the necessary accounting skills who is examining it will
understand it.
 Some times it is impracticable for a person to record every
individual transaction as this would seriously impair the normal
conduct of business particularly where it involves high volume low
value cash transactions.

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 Burden cont…
• Where this occurs the URA will accept summary records which
satisfies the taxpayer‘s obligations provided they are reconciled
with daily bankings which reflect cash takings used for other
purposes, e.g. drawings, expenses, etc

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 The future!
Need for legal practitioners to take record
keeping for tax purposes more seriously;

With the advent of e-tax, will spell gloom

for all of us.

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 End

Q&A
Thank you

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