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Keeping records for business
Keeping records for business
By sauba-mag In Bookkeeping Posted 22nd February 2016 0 Comments

Tax help series

 

Keeping records for business – what you need to know

We all need to keep financial records for various reasons. If you fill in a tax return, VAT return or claim benefits or tax credits, there are some special rules.

Here we tell you:

  • Why you need to keep records
  • What records you should keep
  • How long you should keep them for
  • Where to get further advice.

 

Keeping good records helps you

Having a good record keeping system which you keep up to date will help you:

  • Keep track of your expenses
  • Ask for a bank loan or credit if you need to
  • See quickly what you are owed by others and how much you owe them
  • Save time and accountancy costs
  • Pay the correct amount of tax
  • Receive the correct amount of benefits or credits
  • Avoid paying any extra tax or penalties

 

Why you need to keep records

If you have to fill in and send us a tax return, the law says that you should keep all the records and documents you need to enter the correct figures. If we need to check your return, we may ask to see the records you used to complete it.

Record keeping penalties

If you do not keep adequate records or you do not keep your records for the required period of time, you may have to pay a penalty.

Penalties for an inaccurate return

If you send us an inaccurate return you may have to pay a penalty. Good, up to date records will help you fill in your return correctly and so help you to avoid this penalty.

However, people do make mistakes. You will not have to pay a penalty if you can show us that you took reasonable care to get your return right but still made a mistake. Some of the ways in which you can show you’ve taken reasonable care include:

  • Keeping full and accurate records which are regularly updated and saved securely.
  • Checking with HMRC or an agent or accountant if there is something that you don’t understand.

 

The records you need to keep

The sort of records you need to keep depends upon the type of tax you have to pay.

At the end of this factsheet there are tables which give examples of the most common records.

 

How to keep your records

The law does not say how you must keep your records. You must keep some original paper documents which show that tax has been deducted. An example is form P60 (end of year certificate for PAYE). We recommend that you keep all original documents you receive.

Most other 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 to us in a readable format, if we need to see it.

 

How long to keep your records

As a general rule, you should keep your records for a minimum of six years. However, if you are:

  • An employer, you need to keep Pay As You Earn (PAYE) records for 3 years (in addition to your current year)
  • A contractor in the Construction Industry Scheme (CIS), you need to keep your CIS records for 3 years (in addition to your current year)
  • Keeping records to complete a personal (non business) tax return, you only need to keep them for 22 months from the end of the tax year to which they relate.

If you need to keep records for other reasons, for example the Companies’ Act requires limited companies to keep specific records and you also use those records for tax purposes, you need to be aware that there may be different time limits for retaining them. Be careful not to destroy any records you also use for tax purposes too soon.

 

Right from the start

It is especially important if you are starting a new business that you get a proper record

keeping system in place from the beginning.

For information about setting up in business, including a video about record keeping

go to www.businesslink.gov.uk/taxhelp

For help in setting up a record keeping system, go to www.businesslink.gov.uk and

then select ‘Starting up’ and under the heading ‘Taxes, payroll & returns’ click on ‘Taxes, records and returns – getting started’.

 

The records that you need to keep and further advice

The records you need to keep will depend on the size and complexity of your business and the different taxes that you have to pay, collect or charge. These tables show the most commonly required records and documents. If the law requires you to keep specific records, this is highlighted in the table below.

For more detailed information, please refer to the HMRC website addresses for specific taxes listed in the right hand column.

 

 

Self-employed and partnerships
Form or record Why Further information
A record of all sales and takings, including cash receipts for example

·   Till rolls

·   Sales invoices

·   Bank statements

·   Paying-in slips

·   Accounting records.

A record of all purchases and expenses, including cash purchases for example:

·   Receipts

·   Purchase invoices

·   Bank and credit card statements

·   Cheque book stubs

·   Accounting records.

Allows you to quickly see what you are owed and accurately work out your total income.

 

Allows you to quickly see what you have spent, how much you owe and what you can claim for tax purposes.

 

Self-employed: go to www.hmrc.gov.uk/sa/rec-keep-self-emp.htm

 

Partnerships: go to www.hmrc.gov.uk/sa/rec-keep-part-partners.htm

 

Phone Self Assessment Helpline

0845 900 0444

 

Additional records if your business is VAT registered. All these are required by law
·   VAT account.

·   VAT sales and purchases invoices.

·   Import and export documentation, e.g. delivery notes.

This summary of your allowable VAT inputs and outputs helps you complete your VAT returns accurately. VAT: go to www.hmrc.gov.uk/vat/managing/returns-accounts/accounts.htm

Phone VAT Helpline:

0845 010 9000

 

 

Construction Industry Scheme (CIS) All these are required by law
Form or record Why Further information
Contractor

Details of all payments made to all subcontractors for work done and materials subcontractors have purchased. For example, subcontractor invoices.

Subcontractor

Details of all payment and deduction statements. For example, copies of invoices issued and payment statements received.

To work out the right amount of CIS deductions that you need to make and pay.

 

To fill in your monthly CIS returns accurately

 

Construction Industry Scheme (CIS): go to www.hmrc.gov.uk/cis/returns-recordkeep.htm

 

Phone CIS Helpline

0845 366 7899

 

Records you need to keep continued

 

 

Limited Companies
Form or record Why

 

Further information

 

Accounting records (including details of assets, liabilities, income & expenditure).

Business records (bank statements and paying-in slips,   accounts books, purchases and sales information).

 

To show the financial position at any time and comply with the Companies Act.

To work out the amount of Corporation Tax that you need to pay, or claim back from us. To file an accurate Company Tax Return.

 

Corporation Tax: go to www.hmrc.gov.uk/ct/managing/record-keeping.htm

 

Additional records if your business is VAT registered. All these are required by law
·   VAT account.

·   VAT sales and purchases invoices.

·   Import and export documentation, for example delivery notes.

 

This summary of your allowable VAT inputs and outputs helps you complete your VAT returns accurately.

 

VAT: go to www.hmrc.gov.uk/vat/maaging/returns-accounts/accounts.htm

Phone VAT Helpline:

0845 010 9000

 

 

 

Employer All these are required by law
Form or record

 

Why

 

Further information

 

All PAYE records. For example:

·   Payments made to employees

·   Deductions from your employee wages of Income Tax, National Insurance Contributions (NICs) and Student Loan payments.

·   Details of employee benefits and expenses

·   All records of statutory payments (including sick pay and maternity pay).

 

To work out the right amount of PAYE and NICs that you and your employees need to pay.

 

To complete your annual PAYE Return accurately.

 

To show that your employees are getting any statutory pay they’re entitled to.

 

PAYE: go to

www.hmrc.gov.uk/paye/payroll/day-to-day/records.htm

 

Benefits and expenses: go to

www.hmrc.gov.uk/paye/exb/overview/recordkeeping.htm

 

Phone Employer Helpline

08457 143 143

 

 

 

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