What to keep, and what the CRA can actually ask for

You keep business records for a set number of years counted from the end of the tax year they relate to — for a corporation, its fiscal year, not the calendar one. “Records” means the source documents, not just the bookkeeping file: the invoice behind the ledger line, the contract behind the invoice, the logbook behind the vehicle claim, the count sheet behind the inventory figure. Electronic copies are generally fine if they stay readable for the whole period and stay in Canada unless the CRA has agreed otherwise. And you generally cannot destroy any of it early without asking first.

The year-count is the part everyone half-remembers, and it is the least useful half. What decides a review is whether the document behind the number still exists and can be produced in an afternoon.

The clock starts at the year-end, not at the date on the receipt

An invoice dated January 2026 belongs to the 2026 fiscal year, and the clock on it starts when that year ends — December 31, 2026 for a December year-end — then runs its fixed number of years from there. So that receipt sits on file for the retention period plus almost a full year.

Three things stretch it further:

• A late-filed return. Where a return goes in after its deadline, the clock generally runs from the date you actually filed. File three years late and you have added three years to the shelf.
• An objection or an appeal. While a year is in dispute, nothing relevant to it goes anywhere — you hold until the matter is resolved and the window for a further appeal has closed.
• Records that outlast the ordinary clock. The minute book, the share register, resolutions and the general ledger sit in a permanent file, and stay there until a set period after the corporation is wound up. So do records of property bought and later sold: those generally run from the year the disposition is reported, not the year of purchase — a building held fifteen years carries its purchase documents the whole way.

Records are the source documents, not the bookkeeping file

The ledger is your account of what happened. The records are the evidence it happened. A reviewer asking about a C$1,240 line wants the supplier’s invoice — what was bought, from whom, when, with the GST/HST shown and the supplier’s registration number on it once the purchase passes a certain size. A credit-card statement proves money left the account. It proves nothing about what was bought or why it was the corporation’s.

The set is wider than most owners expect: sales invoices and the contracts behind them · purchase invoices and receipts · bank and credit-card statements with cheque images · payroll records and the T4s filed from them · the subcontractor payment records behind a T5018 · vehicle logbooks · home-office bills and the measurement behind the claim · the physical inventory count sheets · the minute book.

The minute book earns its place. A dividend is a dividend because the directors declared it and a resolution says so. Without the resolution, money that moved from the corporation to you is a draw against the shareholder loan account, with its own repayment deadline and its own tax.

The inventory count is the one nobody keeps. That balance-sheet figure came from someone walking the shelves in the last week of December. The count sheet is the record; the number in the file is a summary of a record you threw out.

Electronic is fine, until it stops being readable

The CRA accepts electronic records, and two conditions do most of the work. They have to stay in an electronically readable format for the entire period — the spreadsheet, not a printout of it — and scanned images of paper are generally acceptable where the imaging meets the CRA’s standard. Records also generally have to be kept in Canada, or outside Canada with the CRA’s written permission and available for examination here. Most cloud accounting is hosted outside Canada, so where your data sits is worth asking the vendor.

The failures that actually happen are duller than any of that. A subscription lapses and takes years of attached receipts with it. A bank purges statements on a retention window shorter than yours. Thermal receipts fade to blank paper in about a year in a glovebox. Export before you cancel anything, and photograph receipts the week they arrive.

A review asks about one line. An audit asks for the books

The distinction decides how much of your filing system gets tested. A review letter names a claim, a period and the documents it wants; you send exactly those. An audit letter names an auditor and a set of taxation years and asks for books and records — general ledger, bank statements, source documents, often the minute book. Working out which letter you are holding is the first move either way.

Missing records do not produce a neutral result. Where records are inadequate the CRA can determine income by other means — bank deposits, net worth, industry ratios — and you are then arguing against its estimate rather than presenting your own. It can require you to keep proper records going forward, with penalties for ignoring that demand. And it can go around you, to your bank, your customers and your suppliers.

Destroying records early needs permission

You can ask, and the request is ordinary: a written application describing the records and the years, which the CRA can grant, refuse, or grant on conditions. Permission covers what it names — it is not a standing clearance for the filing room. Absent it, records go when the period ends and not before. A year under objection has no end yet.

An illustrative example: the logbook that answered two questions

Round numbers, December 31 year-end. An incorporated electrician, 2025 fiscal year. The truck is in his own name; the corporation pays a per-kilometre allowance at the rate the CRA sets each year. It also reimburses meals on out-of-town jobs — C$4,800 for the year, deducted at the general 50% for business meals, so C$2,400 came off income.

In spring 2027 a review letter asks for support for the motor-vehicle allowance and the meal expenses claimed on the 2025 T2.

The logbook was kept in the truck all year: date, destination, job, odometer out and in. It totals 24,000 kilometres, 18,000 of them business — 75%. It also records which nights he was out of town.

That one record answers both lines. The allowance holds because it was computed on kilometres actually logged. The meal claim holds for the days the log puts him away from home. Receipts back C$3,900 of the C$4,800, most with the job number on them; C$900 has only a statement line. That C$900 is disallowed — the deduction drops by C$450 — and the file closes.

Now remove the logbook, and the C$450 stops being the number that matters. With no record of distance the allowance is no longer computed on kilometres driven, and an allowance not based on kilometres driven is generally taxable to the recipient — so it moves onto his T4 and his 2025 personal return is reassessed alongside the corporate one. The meal days lose their anchor at the same time. Had the corporation paid a flat per-diem rather than reimbursing receipts, that log of days would have been the entire file. Owner-operators run the same exposure with more zeroes, since eligible long-haul meals are deductible at 80% and the trip log earns the extra thirty points.

The filing system that makes reviews boring

None of this needs software. It needs one habit — the document gets stored when it arrives, not when it is asked for.

• One folder per fiscal year rather than per calendar year, matching how the clock actually runs.
• Source documents attached to the transaction in the accounting file, so support for a number is one click from the number.
• Logbooks and count sheets kept during the year. A full-year vehicle log establishes a base year, and once you have one a sample period can generally stand in for later years. Reconstructed in March, a log persuades nobody.
• A closed year-end pack: financial statements, the T2 as filed, the notice of assessment, GST/HST and payroll summaries, the slips. Archived at year-end and not touched again.
• An export taken before any software or bank relationship ends — including when you change accountants.

What Cadence does

We tell you at onboarding what has to be kept and what we hold for you. Where we do the bookkeeping, source documents get attached to transactions as the year runs, and the year-end pack is closed and archived when the file closes, not assembled the week a letter arrives. Where you or your own bookkeeper keep the books, we say which records reviews ask for and check they exist before year-end. When a letter comes, routine CRA correspondence is answered from the file we already hold. Whether your storage arrangement satisfies the in-Canada requirement turns on your software contracts and where the data lives — a question we would rather ask at onboarding than during a review.