As of April 2010, the number of years the Taxman can go back to investigate past tax returns has changed. 
Below is the new position:
Normal investigation time limit - 4 years for income tax, corporation tax, capital gains tax, PAYE and VAT
Careless mistakes - 6 years for income tax, corporation tax, capital gains tax and PAYE but 4 years still for VAT
Deliberate mistakes - 20 years for income tax, corporation tax, capital gains tax, PAYE and VAT
Further details can be found on the HMRC website.
2 comments ↓
So, if you feel you might have possibly made a mistake on your tax returns, you can throw your papers away after 3 or 4 years. But if the taxman claims you made any mistake deliberately, you suddenly find you should have kept your tax papers for 20 years and you’ve no papers to prove your innocence.
If the taxman finds that you have kept your tax papers for 20 years, that’s good evidence that you know your mistake was deliberate!
So destroy your tax papers aqfter 3 or 4 years and you can’t prove your innocence; keep the papers for 20 years and the taxman has evidence that you’re guilty!
Either way you can’t win. Sounds like the old test for witches: tie their hands and feet together and throw them in the river: if they drown, they’re innocent and if they float, they’re guilty so burn them!
For ‘3 or 4 years’, read 4 or 6 years. Sorry.
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