The General Data Protection Regulation (GDPR) has fundamentally changed how businesses handle personal data across Europe and the UK. For Xero users, this creates a unique challenge: how do you balance GDPR's data minimisation principles with the legal requirement to retain financial records for years? This comprehensive guide explains everything you need to know about GDPR compliance for your accounting data.
GDPR applies to any personal data you process, and your accounting records are full of it. Customer names, addresses, email addresses, bank details, and purchase histories are all considered personal data under the regulation.
The key principles of GDPR that affect your accounting data include:
Here's where it gets complicated. GDPR says you shouldn't keep data longer than necessary, but tax authorities require you to retain records for extended periods:
The good news is that GDPR explicitly recognises this conflict. Article 17(3)(b) states that the right to erasure does not apply where processing is necessary "for compliance with a legal obligation." This means you can—and must—retain accounting records even if a customer requests deletion.
Understanding what data Xero holds is the first step to GDPR compliance. Your Xero account likely contains:
For most accounting data, your legal basis will be one of the following:
Importantly, you generally don't need consent to process accounting data because you have other legal bases. However, you must still be transparent about your data processing.
Your privacy notice should explain:
Under GDPR, individuals have rights regarding their data. Here's how to handle common requests:
Right of Access (Subject Access Request): You must provide a copy of all personal data you hold. Export the contact record and transaction history from Xero.
Right to Rectification: If data is inaccurate, update it in Xero. Keep a record of the correction.
Right to Erasure: For active accounting records within the retention period, you can legitimately refuse this request based on legal obligation. However, after the retention period ends, you should delete unnecessary data.
GDPR requires "appropriate technical and organisational measures" to protect personal data. For your Xero data, this includes:
Under GDPR terminology, you are the "data controller" (you decide what data to collect and why), and Xero is a "data processor" (they process data on your behalf).
Xero has published their GDPR compliance documentation, including:
As a controller, you should review Xero's data processing terms and ensure they meet your compliance requirements.
Here's an important consideration: GDPR applies to backups too. If you back up your Xero data (which you should for business continuity), those backups also contain personal data.
Here's a practical framework for managing accounting data retention:
You don't need consent for processing accounting data. Using consent when you have another legal basis actually weakens your position.
You have one month to respond to data subject requests. Set up a process to handle them promptly.
Just because you can keep data for 6+ years for tax purposes doesn't mean you should keep it forever. Implement a data retention schedule.
Ensure your backup strategy is GDPR-compliant, including secure storage and appropriate retention.
GDPR compliance for Xero users isn't as daunting as it might seem. The key points to remember are:
By understanding these principles and implementing appropriate policies, you can confidently use Xero while meeting your GDPR obligations.
This blog post is for informational purposes only and does not constitute legal advice. For specific guidance regarding your GDPR obligations, please consult with a qualified data protection professional or legal advisor.
