22. December 2017

Digital files and records and their legal admissibility in the UK

Digital files and records and their legal admissibility in the UK

The guidance on electronically storing documents and destroying of paper documents depends on what type of organisation you are. This article covers excerpts from different UK regulatory bodies respective guidelines. Click on the links here to find out more information about how digital file storage and document management systems can help your organisation.

The million-pound question is… “Can I destroy the original paper files once it has been scanned and placed into digital storage?”

The answer is: if you digitise your paper files correctly then YES!

When it comes to UK legal requirements for converting paper files to electronic format, there are guidelines as to the type of records. HMRC guidance would apply for general business records which companies must retain for six years for VAT inspection purposes, and they state that as long as your records meet HMRC’s requirements, you can file them digitally. All you need to make sure is that your records are easily accessible in case of a visit from a VAT officer. The Financial Services Authority (FSA) governs IFAs and investment companies and has specific requirements for record keeping, as does the Law Society for Solicitors and Law Firms.

In the UK, the British Standard (BIP 0008) which lays down the process steps and guidelines required when converting paper records to legally admissible electronic records was introduced as far back as 1996 and has been updated numerous times to keep the standard relevant to consider technological developments.

What are digital records?

Digital records are records stored in digital format.  There are two main types:

  1. Records “born” or created digitally, for example, word processor documents, PDFs, emails, spreadsheets or database records;
  2. Paper records copied to digital media, for example, documents scanned into a digital filing system.

How long do you need to keep your records?

Self employed: 22 months after the end of the tax year e.g. records that come under 2017-18 need to be kept until January 2020.

Limited company: 6 years from the end of the company financial year that they correspond to. As always, check the relevant guidelines with your accountants to be sure, especially when dealing with documents that cover more than one period, relate to assets with a lifespan longer than 6 years, if you submitted the tax return late or are having a compliance check on it.

What is legal admissibility?

Legal admissibility refers to whether a court of law would accept a a digital file as a valid piece of evidence in case of a dispute. Even though records can be admissible (i.e. accepted as evidence) the opposing party and their legal counsel may call the evidential weight into question if there are any doubts as to the record’s veracity or integrity.

  1. Digital files must be accurate, i.e. unaltered representations of the information;
  2. Digital files must be authentic, i.e. what it purports to be;
  3. Digital files must not have been tampered with;
  4. Digital files must be stored in a system that has been secure throughout the file’s lifetime.

If you can’t demonstrate the above, then the file’s evidential weight can be severely called into question in case of a dispute.

There are no hard and fast rules to determine whether a digital file is 100% legally  admissible, and it remains to say that there are many ways that paper files are commonly manipulated, forged, called into question etc. but it is of course possible to maximise the evidential weight of files stored digitally by following the relevant guidance.

Regulatory body guidelines

I. HM Revenue and Customs Guidance

VAT-registered businesses must:

keep records of sales and purchases

keep a separate summary of VAT called a VAT account

issue correct VAT invoices

You must keep VAT records for at least 6 years (or 10 years if you use the VATMOSS service.

You can keep VAT records on paper, electronically or as part of a software program (eg book-keeping software). Records must be accurate, complete and readable.

If you’ve lost a VAT invoice or it is damaged and no longer readable, ask the supplier for a duplicate (marked ‘duplicate’).

HMRC can visit your business to inspect your record keeping and charge you a penalty if your records aren’t in order. [1]

II. Law Society Guidance

Can I store documents photographically or electronically, and destroy the originals?

Original documents, such as deeds, guarantees or certificates, which are not your own property, should not be destroyed without the express written permission of the owner. Where the work has been completed and the bill paid, other documents, including your file, may be stored, for example, on a CD ROM, computer system or microfilm and then destroyed after a reasonable time. […]

What is the evidential value of a photographically or electronically stored document where the original has been destroyed?

There is a dearth of judicial authority on this topic and, until the law and practice on the subject of microfilmed or electronically stored documents are clarified, it is only possible to provide general guidelines.

The Society has been advised that:

(a) A microfilm of any document in a solicitor’s file will be admissible evidence to the same extent, no more and no less, as the document itself, provided that there is admissible evidence of the destruction of the document and identification of the copy.

(b) Written evidence of the destruction of the original and of identification of the copy will enable the microfilm to be adduced in subsequent civil proceedings (under the Civil Evidence Act 1968) and in criminal proceedings (under the Police and Criminal Evidence Act 1984).

What procedures would the Society recommend where an original document is stored electronically or photographically and then the original is destroyed?

(a)Written evidence of the destruction of the original and of identification of the copy must always be preserved in case oral evidence is no longer available when needed (see question 7(b) above).

(b) There should be a proper system for:

(i) identifying each file or document destroyed;

(ii) recording that the complete file or document, as the case may be, has been photographed;

(iii) recording identification by the camera operator of the negatives as copies of the documents photographed; and

(iv) preserving and indexing the negatives.

(c) If a microfilm, electronically or photographically stored data is required to be produced in evidence, a partner or senior member of staff should be able to certify that:

(i) the document has been destroyed;

(ii) the microfilm, electronically or photographically stored data is a true record of that document; and

(iii) the enlargement is an enlargement of the microfilm, electronically or photographically stored data.

(d)Microfilm copies of some documents (e.g. coloured plans) can be unsatisfactory, in which case the originals should be preserved. [2]

III. Financial Services Authority Guidance

SYSC 9.1.4 G
Subject to any other record-keeping rule in the Handbook, the records required under the Handbook should be capable of being reproduced in the English language on paper. Where a firm is required to retain a record of a communication that was not made in the English language, it may retain it in that language. However, it should be able to provide a translation on request.

SYSC 9.1.5 G
In relation to the retention of records for non-MiFID business, a firm should have appropriate systems and controls in place with respect to the adequacy of, access to, and the security of its records so that the firm may fulfil its regulatory and statutory obligations. With respect to retention periods, the general principle is that records should be retained for as long as is relevant for the purposes for which they are made. [3]

 

Summary… tl;dr:

Digital documents ???? can be as legally valid ✔️as their old-school ????️???? paper equivalents.
Fed up ???? with too much ????️????️????️????and not enough????‍????????????‍?????????
Fancy saving ???????? as well as serious amounts of ???? at the same time?
Don’t forget to consult your accountant????‍????????‍???? and the relevant legal and fiscal requirements ????⚖️????
???? Work smarter, not harder????

 

Source references
[1] HM Revenue and Customs Guidance (excerpts from VAT record keeping) https://www.gov.uk/vat-record-keeping
[2] Law Society Guidance (excerpts from the PDF guidelines on Ownership, Storage and Destruction of Documents ) https://www.lawsociety.org.uk/
[3] Financial Services Authority Guidance (excerpts from the FCA Handbook) https://www.handbook.fca.org.uk/handbook/SYSC/9/1.html

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Salvatore Coppola-Finegan
Internationalisation Manager. With high-level achievements on four continents, as well as a double M.A. from St Andrews, Salvatore is responsible for developing new markets for AMAGNO around the world.

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