Keeping Business and Accounting Records

Introduction to keeping records

You must keep a number of records about your company or LLP, (including statutory records and registers) about the business itself; as well as financial and accounting records to complete tax returns and work out tax payments. You can take care of these record-keeping and accounting requirements yourself, but it can be somewhat time-consuming and complex, so you may prefer to hire an accountant to assist with your book-keeping and tax affairs.

Records about your company or LLP

When you set up a limited company or limited liability partnership, you will be required by law to keep (where applicable) the following statutory records and make them available for public inspection at your registered office or SAIL address:

• Register of directors - details of all past and present directors
• Register of directors’ residential addresses
• Register of LLP members’ residential addresses (not available for public inspection)
• Directors’ service contracts
• Directors’ indemnities - insurance that protects directors from personal liability to the company
• Register of company members - details of all past and present shareholders or guarantors
• Register of company secretaries - details of all past and present secretaries
• Register of LLP members - details of all past and present LLP members, and which of those are designated members
• Register of PSC
• Register of charges - record of loans or mortgages secured against the company’s or LLP’s assets
• Record of debenture holders - long term security yielding a fixed rate of interest, issued by a business and secured against assets
• Records of resolutions and minutes of meetings
• Contracts of memoranda relating the purchase of own shares
• Documents relating to the redemption or purchase of own shares out of capital by a private company
• Certificate of incorporation
• Share certificates and Stock Transfer forms
• Memorandum and articles of association

You may keep all or some of these records at your registered office, or you may choose an alternative location (a SAIL address) to keep some or all of these records and make them available for inspection; however, all records of a similar type must be kept together in the same location and you must tell HMRC which records are at which address.

Statutory registers should be kept for the life of your company or LLP. Minutes of meetings and copies of resolutions must be kept for a minimum of 10 years from the dates they are produced.

Financial and accounting records

Every company and LLP must keep accurate financial and accounting records, regardless of whether the business is actively trading or dormant. These records should include, where applicable:

• Record of all sales and income:
• • Cash receipts
  • Till rolls
  • Sales invoices
  • Bank statements
  • Pay-in slips
  • Accounts books
• Record of all purchases and expenses:
• • Cash purchases
  • Receipts
  • Purchase invoices
  • Bank and credit card statements
  • Chequebook stubs
  • Motoring expenses and mileage records
  • Accounting records
  • Details of all payments made to subcontractors for work carried out and materials they have purchased - for example, subcontractor invoices
  • Record of assets and liabilities
• Statements of stock held by the business at the end of each financial year
• Statements of stock takings from which the statements of stock have been taken or prepared
• Statements of goods and services bought and sold, other than by ordinary retail trade. This should include a list of the goods, buyers and sellers
• Copies of past annual accounts, Company Tax Returns and Self-Assessment tax returns
• VAT records:
• • Copies of all invoices issued
  • Originals of all invoices received
  • Self-billing agreements - invoices prepared by customers
  • Name, address and VAT number of any self-billing suppliers
  • Debit or credit notes
  • Import and export records (delivery notes, for example)
  • Items that VAT cannot be reclaimed on - business entertainment costs, for example
  • Records of any goods given away or taken from stock for private use
  • Records of all zero-rated, reduced or VAT exempt items bought or sold
  • A VAT account - separate record to the VAT your business charges and pays on purchases.
  • General business records such as bank statements, cash books, cheque stubs, pay-in slips and till rolls
• PAYE records
• • Payments made to employees
  • Deductions from employees’ wages of Income Tax, National Insurance Contributions and Student Loan repayments
  • Details of employee benefits and expenses
  • Records of statutory payments - Maternity Pay, Paternity Pay, Sick Pay

How long must a company or LLP keep these records?

• Private companies and LLPs must keep accounting records for a minimum of 3 years from the dates they are produced.
• PAYE records must be kept for a minimum of 3 years from the end of the tax year to which they relate.
• VAT records must be kept for a minimum of 6 years. They can be kept on paper, in electronic form, or as part of a software programme.
• Contractors in the Construction Industry Scheme (CIS) must keep CIS records for three years.
• Records for completing personal tax returns (Self-Assessment) need to be kept for at least 5 years after the 31st January submission deadline of the relevant tax year.

As a general rule, however, you should keep all financial statements, accounting records and tax returns for at least 6 years.

How to keep records

The law does not state how you must keep the majority of business and accounting records, but you will have to keep some original documents that show that tax has been deducted, for example: form P60 End of Year Certificates for PAYE. It is good practice to keep all original documents you receive.

CIS vouchers, dividend vouchers and bank interest certificates must be kept in their original format. Most records can be kept electronically (on a computer or any storage device such as disk, CD, memory stick or microfilm) as long as the method you use captures all the information on the document (front and back), and allows the information to be presented in a readable format.

Inspection of records

You must make your business and accounting records available for inspection at your registered office address. You may also make some or all of these records available at a SAIL address if this is more convenient, but you must notify Companies House of this address and the records you keep there.

Statutory records should be available for inspection by HMRC, Companies House, and members of the general public between the hours of 9am-3pm every working day. They may be inspected for a period of up to 2 hours. Any request from a member of the general public should be for a ‘proper purpose’ and contain the following information:

• Name and address of person, company or organisation making the request
• Purpose of inspection
• Who the information will be given to, and how the information will be used

The required notice period for inspection of records is 10 working days, unless the inspection date falls within the notice period of a general meeting or a written members’ resolution. In such instances, the required notice period is just two working days. A company director or secretary, or an LLP designated member must reply to any request made for a ‘proper purpose’ within 5 working days. Failure to do so could result in a fine.