Recordkeeping represents an important discipline in the world of accounting. After all, the dreaded knock of the taxman is enough to strike fear into even the most organised and efficient accounting professional, so ensuring you maintain a clear and detailed record of expenses is a great means of maximising peace of mind.
Of course, it may not be easy – or even necessary – to keep hold of every last detail for when the taxman comes. In fact, the type and extent of records you need to keep hold of may differ depending on the size of your business.
So, what specifically should you be keeping a record of? And how long do you need to retain such information?
What records should I keep?
It would be easy for us to say, ‘Keep a record of everything’, but breaking it down into sections will enable you to keep the right information together – perfect if HMRC come calling!
First, you should maintain a record of information regarding your company. This will relate to those directors and shareholder rights (if running a limited company), details of any loans or mortgages held against the company’s name, and information related to any promises to repay loans (debentures) and indemnities should the company be responsible for something going wrong.
Second, you should retain up-to-date accounting records that detail all information relating to income and expenditure. This should take into account revenue generated, assets owned, debts both owed and owing, details of stock bought and sold, and information on those from whom you purchased and/or sold to. This information should be recorded via receipts, invoices, bank statements, purchase orders, etc.
How long should I keep the records?
HMRC itself recommends that such information should be held for six years from the end of the last financial year to which they relate. However, certain records pertaining to transactions covering more than one accounting period, those relating to equipment or machinery expected to last longer than six years, or if HMRC has initiated a compliance check on your Company Tax Return, should all be held for longer.
How should I maintain records?
Keeping accounting records should be a relatively straightforward exercise, particularly with digital records and online accountancy software making it easier than ever. Alternatively, you can keep your records up-to-date at your registered office in their original format. Regardless of how you keep them, it’s of the utmost importance that you are able to access and present details quickly and effortlessly should the taxman so request.
For more information and comprehensive taxation advice, Kreston Reeves will have the details necessary to support you and your business. Contact today to find out more.