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Document Management & The Law…
1) Legality Overview
2) The British Standard BS 10008 in brief. Aspirational targets for businesses.
3) Scanned documents and HM Customs and Excise
4) Scanned documents and the Inland Revenue
5) Retention / Conclusion
6) Further information and source acknowledgement
Conventional business filing systems only ever seem to grow and grow. Legal requirements and good practice demand that we retain thousands of reams of paper detailing transactions, research and correspondence for many years before they can finally be consigned to the shredder. As a result, valuable office space is allocated to the storage of all this filing. Worse still, when so many pieces of paper are filed by hand, errors are frequent, systems are rambling and staff can spend hours searching for that elusive invoice from 1994.
Technology has, however, come to the rescue of those companies finding themselves drowning in a sea of paper. Document scanning and electronic storage is a growing industry as more and more businesses decide to take the leap, storing their paperwork on their PCs instead of in spare office corners. When implemented with care, electronic filing can bring many benefits. Using an intranet, LAN or WAN system allows staff to share files, whilst a database system would enable rapid searches that would, for example, take the 1994 invoice hunt down from hours to seconds. Much of the paperwork could be destroyed once scanned, and the filing space then used for more profitable purposes.
One of the reasons why businesses can sometimes be reluctant to move towards document scanning isn’t so much the initial investment costs associated with streamlining but the issue of legal validity or admissibility of scanned documents. For example, if a VAT discrepancy were to arise, could you be sure that Customs & Excise would accept scanned documentation as evidence? What would happen if a company became embroiled in a court case? Do electronic documents hold the same evidential weight as paper?
The basic legalities of scanned documents – do they stand up in court?
In comparison to paper documents, the issues for electronic documents actually seem to rest on how much integrity they have in terms of ‘pedigree’ and authenticity rather than their admissibility. Courts and governing bodies now accept that electronic filing is normal procedure for many companies, and they fully accept electronic documents as evidence or supporting material so long as companies can prove that they’ve taken the appropriate measures to ensure their integrity.
The basis in law…
The Civil Evidence Act 1995 is perhaps the most relevant point of law to address in relation to electronic documents. Its legacy is to take the onus off the question of physical admissibility; instead examining the actual weight carried by the electronic evidence submitted. The evidential value is then determined by the procedures followed by the company presenting the documents. To put it simply, if a company submits a document that has clearly been unaltered since its creation or which brings with it a clear audit trail that categorises any changes made to it along the way, then that holds for more evidential value than a document that could possibly have been amended in the interim, Simple procedures ensure document integrity for a company looking to move towards an electronic filing system.
Sections 8 and 9 of the Civil Evidence Act 1995 illustrate the legal guidelines for electronic documents as evidence:
8 (I) Where a statement contained in a document is admissible as evidence in civil proceedings, it may be proved:
(a) by the production of that document, or
(b) whether or not that document is still in existence, by the production of a copy of that document or of the material part of it, authenticated in such a manner -ass the court may approve.
(2) It is immaterial for this purpose how many removes there are between a copy and an original,
9 (I) A document that is shown to form part of the records of a business or public authority may be received in evidence in civil proceedings without any further proof
(2) A document should be taken to form part of the records of a business or public authority if there is produced to a court a certificate to that effect signed either by an officer of the business or authority to which the records belong.
Essentially, this law may be interpreted to show that an original document is not the only admissible evidence in civil courts. Electronic copies of documents are acceptable so long as their integrity can be proved. Criminal courts involve a more complex set of guidelines, and businesses with concerns about compliance in this area should check with a specialist lawyer.
This information leads to the question of how to prove integrity and the level of standards to which companies should adhere to ensure best practice in their document management. The next section of this paper about the current British Standard in the field should make this clearer.
2) The British Standard in Brief. Aspirational Targets for Business…
BS 10008 is the current British Standard document relating to ‘Legal Admissibility and Evidential Weight of Information Stored Electronically’. It sets a benchmark for procedures that businesses should follow in order to achieve best practice, and therefore, legal admissibility of their electronic documents.
For a company to claim full compliance with the British Standard (hereafter known as the ‘Code’), they would hav
e to implement rigorous document management systems. Through working with a specialist document scanning company with in-depth; understanding of the Code, business managers can identify the best and most compliant system for their needs.
Compliance with the Code wherever possible shows a court or official body such as Customs & Excise that an organisation follows best practice in their document management. It also minimises the risk of a document presented to a civil court being rejected. The procedures outlined in the Code, whilst thorough, really do hinge around common sense. They also provide a clear framework for companies to use to improve their operational systems or to start mapping their transition to eFiling.
3) Scanned Documents and HM Customs and Excise…
What about the VAT man?
What responsibilities do companies have to Customs & Excise?
At present the law makes no distinction between electronic or paper records; As a result, Customs & Excise simply refer to ‘records’ in their guidelines – whether a business keeps their records on paper or electronically makes little difference.
They do, however, insist that you inform them of the format you use for your records. Section 5.4 of VAT Notice 700/21 reads as follows: If you keep all or part of your records and accounts on a computer, you must make sure that you can meet your legal obligations to: 1) account for VAT properly 2) provide information to us whenever we visit you 3) keep records in the required detail for the required length of time.
In practical terms, a business should therefore advise their local VAT office that they wish to store scanned document copies of all their records in ‘format Y’ (usually TIF format), and that those records will be held within ‘document management system X’.
Customs & Excise don’t recommend any particular software packages or file formats and at present an acceptable standard has not been precisely defined, but may be taken to mean that all details on the reproduced documents are clear and legible’, which enables fairly1 broad interpretation.
By also following the Code of the British Standard BS 10008; in addition to the requirements of Customs & Excise, a company can take the best precautions available to ensure that their records are acceptable for a VAT inspection.
Timescales for record keeping…
The general requirement for keeping records is a period dating back at least 6 years. For many companies, keeping paper records for so long is fraught with difficulties. By agreement with the Commissioners, this time limit requirement may have a degree of flexibility. It could be noted, though, that if a company uses electronic filing, then the 6 year timescale is of little consequence;
One important consideration for Customs & Excise is their requirement that any original paper invoices must be retained for a period of no less than I VAT period. This would ensure that the current VAT return can be verified using original documentation. Depending on the nature of the company’s accounting pattern, this period is either I month, 3 months or 1 year in length.
After this time and submission of the return in question, the company can then consign: those accounting records to electronic filing in confidence.
4) Scanned Documents and the Inland Revenue…
And the Tax Man?
What responsibilities do companies have to the Inland Revenue?
Not a world away from the requirements of Customs & Excise, the Inland Revenue has adopted a fairly flexible view of records stored electronically, based on the same grounds that the law doesn’t at present differentiate between paper and electronic documents.
Set out in Tax Bulletin 37, the Revenue provides the following guidelines:
Records may be preserved on optical imaging systems, and the originals discarded, provided that what is retained in digital form represents a complete and unaltered image of the underlying paper document. We are now able to go further. Both in the case of companies and unincorporated businesses we can accept other methods which preserve the information in the records in a different form*This is so long as those methods capture all the information needed to demonstrate that a; complete and correct tax return has been made and are capable of yielding up that information in a legible form.
They go on to confirm that some material, such as a company’s standard terms and conditions of sale, is not required to be retained for tax purposes. However, exactly what material should be retained and what can be discarded should be checked thoroughly with a tax adviser as regulations differ across industries.
In this Tax Bulletin, the Inland Revenue also makes the important acknowledgement that any company complying with the British Standard BS 10008 will automatically satisfy the tax requirements for keeping electronic records.
At present, under the terms of the Companies Act, for roost companies the timescale that the Revenue requires material to be retained is set at 6 years from the end of an accounting period. In cases of investigation or late return submission, then this period will extend accordingly. Once again, electronic records management is by far the easiest method of storage for convenience and space-saving benefits.
As is impossible to ignore, most businesses are at least assessing the benefits of electronic filing for their operations. Rather than: being a fairly un-tried business: process, it’s now so commonplace that bodies such as the Inland Revenue and Customs & Excise are addressing the standards they require in their publications.
The British Standard BS 10008 is the most comprehensive information available to businesses about best practice to follow to ensure legal admissibility of information. As shown above, both the Revenue and Customs use the Code as the pinnacle of their requirements. In complying with the Code, a business can be assure as possible that they are satisfying official record-keeping needs.
To implement an electronic document management system is easier than it may appear at first By working in conjunction with a specialist scanning company such as Content Capture Services Limited, businesses benefit from great knowledge and experience as they start the process of removing the billions of sheets of paper that currently fill offices around the world.
6) Further Information and Source Acknowledgement BSI Publication – BS DISC PD0008:I999 Legal Admissibility and Evidential Weight of Information Stored Electronically
Inland Revenue Publication—Tax Bulletin 37
Public Record Office Publication – Functional Requirements for Electronic Management Systems
HM Customs & Excise Publication – VAT Notice 700/21 Keeping Records and Accounts The Civil Evidence Act 1995
Content Capture Services Limited would always advise consultation with a legal expert before destroying any paper documents. Whilst this information is created in good faith, and is understood to be correct at the time of writing, Content Capture Services Limited accept no legal responsibility for information accuracy, loss or legal action suffered by businesses relying on the advice or information contained.