Income Tax Act s. 230: Records and Books

CRA’s expectation of contemporaneous documentation for SR&ED claims rests on section 230: every person carrying on business must keep records and books of account in a form that lets the taxes payable be determined. Subsection (4) sets the retention period, generally six years from the end of the last taxation year to which the records relate, and subsection (4.1) extends the same obligation to electronic records. In an SR&ED review, weak or after-the-fact records are one of the most common reasons claims are reduced.

Text of the Provision

230(1) Every person carrying on business and every person who is required, by or pursuant to this Act, to pay or collect taxes or other amounts shall keep records and books of account (including an annual inventory kept in prescribed manner) at the person’s place of business or residence in Canada or at such other place as may be designated by the Minister, in such form and containing such information as will enable the taxes payable under this Act or the taxes or other amounts that should have been deducted, withheld or collected to be determined.

230(3) Where a person has failed to keep adequate records and books of account for the purposes of this Act, the Minister may require the person to keep such records and books of account as the Minister may specify and that person shall thereafter keep records and books of account as so required.

230(4) Every person required by this section to keep records and books of account shall retain

(a) the records and books of account referred to in this section in respect of which a period is prescribed, together with every account and voucher necessary to verify the information contained therein, for such period as is prescribed; and

(b) all other records and books of account referred to in this section, together with every account and voucher necessary to verify the information contained therein, until the expiration of six years from the end of the last taxation year to which the records and books of account relate.

230(4.1) Every person required by this section to keep records who does so electronically shall retain them in an electronically readable format for the retention period referred to in subsection 230(4).

Source: Income Tax Act (Canada), section 230 (subsections (1), (3), (4) and (4.1); subsection (2), which concerns registered charities, is omitted). Archived excerpt; subsequent amendments are not reflected. For the current text see the Income Tax Act at Justice Laws.