Some areas of business, such as expenses, accounting and record-keeping, can become overwhelming. There is a legal obligation to retain accurate financial records, but not all business owners know the exact documents to keep, how to keep records correctly or for how long.
In general, companies need to keep records for six years from the end of the last financial year to which they relate. While this may seem like a long time, within the course of six years HMRC can choose to investigate company accounts, and businesses are obligated to provide accurate records. If a company does not keep the required documents, you can be disqualified as a company director or fined £3000 by HMRC.
HMRC started a compliance check into company tax returns. In the following circumstances, you should keep records for longer than six years:
Companies must keep certain records about the company itself and records regarding the company's finances and accounts.
Companies must keep records of the following:
A company must also keep a PSC register of 'people with significant control' which includes details of anyone who:
Even if there are not people with significant control, you are still obligated to keep a record.
Companies must keep records of accounts that include:
It is also necessary to keep other calculations and records needed to prepare and file company annual accounts and Tax Return, including records relating to:
If your company records are lost, destroyed or stolen, you must inform your Corporation Tax Office immediately. Include whether the records were lost, damaged or stolen in your company tax return. The Corporation Tax Office requires you to recreate any of the affected documents. In order to avoid this scenario, the following tips will help you keep your financial records safe and secure:
It might be a good idea for your business to employ a trained, experienced bookkeeper to assist with company record keeping. Some benefits of hiring a bookkeeper include:
HMRC recommends keeping original documents; however, you don't necessarily need to keep the original paper copies. Most records can be scanned into a computer and held electronically, although HMRC asks for original documents which show tax deductions (for example, an employee's P60).
It is not difficult to make electronic copies of documents. Provided that all relevant information is clear and legible, it is acceptable to take a photograph of the documents, using a smartphone, for example. Keeping electronic records can be made easy as several applications can be used to scan and store documents.
Here are a few of the popular applications used by businesses for online storage of documents:
One of the best-known applications, Google Drive, has everything required to scan, save and automatically back up your records safely. Google Drive has a built-in scanning function makes it simple to turn paper documents into electronic PDF documents to be stored.
The Dropbox app has an auto-backup feature which means that every photo taken on your smartphone will be backed up automatically in the cloud for safekeeping. However, there is no option to convert into PDF form with Google Drive.
As an expense management tool, Soldo stores all of your receipts electronically. Soldo’s software integrates with popular accountancy tools such as Xero and Quickbooks, making end of month reporting as easy as possible. Find out more about how Soldo can help improve your financial management here.