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Business records
Business, accounting and tax records which must be maintained by businesses and charities

Introduction


There are specific and sometimes overlapping legal requirements to maintain business and accounting records which affect unincorporated businesses, companies and limited liability partnerships and other entities in the areas of general administration, tax and VAT, health and safety, as well as in specific activities such as food law production and many other areas

These requirements focus on different aspects and often impose different minimum periods during which records must be preserved.


In addition to basic legal requirements, a well-run business or organisation will require good records relating to such things as:


* Employees including personal details (address, contact numbers for employee and next of kin, employment contract, remuneration, personal training/development, health and safety at work disciplinary record);
* Customers details including preferably a link to sales records in the accounts and information on how they came to the business and names of other customers whom they have introduced to the business;
* Suppliers details again including preferably a link to purchase records in the accounts;
* Asset registers and maintenance records;
* Insurance policies and claims records

In these circumstances it is best to adopt an integrated system of record-keeping in order to provide the business owners and managers with complete, accurate and up to date information which is not only legally compliant but also practical to maintain and provides “joined up” management information.

Electronic or digital records


It almost goes without saying that in modern conditions, electronic or digitised record-keeping is essential. However some paper based records may need to be maintained for practical or legal purposes, and the electronic system should recognise and allow for such records. Although large or specialised businesses and organisations may need to set up and maintain bespoke or complex systems, many businesses and organisations need only commonly used applications such as word processing, scanning and production of pdf documents, together with spreadsheets for financial modelling and accounting purposes, and a good accounts package.

Flexible and multi-purpose: ideally the record-keeping system should be integrated so that information collated for different purposes may readily be extracted and processed when required.

Record keeping requirements for all businesses


The following is a brief description of the main records which businesses and organisations are legally required to keep. By the nature of the subject, the description is not comprehensive.

Employment records


Employers must provide employees with particulars of their employment and itemised pay statements (Employment Rights Act 1996 Part I).


Employers must also comply with PAYE obligations regarding reporting and accounting for income tax and national insurance deductions (Income Tax (Pay As You Earn) Regulations 2003).


See the HMRC pages on Employers

Health and Safety at work


The Health and Safety at Work etc. Act 1974 (“HSWA”) and regulations made under the Act contain record-keeping requirements in a number of cases. The most common ones include:
* Risk assessments records;
* Gas safety and maintenance records to be kept by landlords under(to be kept for at least 2 years);
* Records of any reportable injury, over-three day injury, disease or dangerous occurrence to be kept for at least 3 years [Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 1995];
* Health surveillance records of employees exposed to a substance hazardous to health to be kept for at least 40 years[ Control of Substances Hazardous to Health Regulations 2002, Control of Lead at Work Regulations 2002 and Control of Asbestos Regulations 2012].
See generally the HSE pages

Tax records


In general all self-employed people, businesses and organisations should keep sufficient records to enable them to complete their tax return accurately. Depending upon the type of business or activity, the records should include:

* cash book;
* petty cash book;
* sales and purchase ledger;
* wages book;
* invoices and receipts issued and received;
* electronic records of sales or till rolls;
* details of items not rung through the till;
* details of incidental or miscellaneous income - for example rent for accommodation owned by the business;
* hire purchase and leasing details;
* an inventory of stock on hand at the end of your accounting year;
*bank and building society statements, pass books, cheque stubs and paying-in slips which include details of business transactions;
* details of any money taken out of the business for your own or your family's personal use;
* details of any private money brought into or taken from the business;

Records must be kept in general for 5 years from the normal tax return filing date of 31 January. In the case of a company subject to corporation tax, the period is generally 6 years from the end of the financial year to which they relate.
[Taxes Management Act 1970 s.12B]

Further information: see HMRC pages on record keeping for:
* Self-employed;
* Partnerships;
* Companies

VAT records


If a person is subject to VAT registration, the records to be kept include:

* copies of all invoices you send;
* originals of all invoices you receive;
* self-billing agreements (this is where the customer prepares the invoice);
* name, address and VAT number of any self-billing suppliers;
* debit or credit notes;
*import and export records;
* records of items you can’t reclaim VAT on - eg business entertainment;
* records of any goods you give away or take from stock for your private use;
* records of all the zero-rated, reduced or VAT exempt items you buy or sell;
* a VAT account.

A taxable person must also keep general business records such as bank statements, cash books, cheque stubs, paying-in slips and till rolls.

Cash accounting scheme


If a taxable person uses the Cash Accounting Scheme, it must use these records to match them against payment records and receipts.

Exceptions


Retailers do not have to issue VAT invoices unless the customer asks for one (a copy should be kept). Retailers may issue ‘simplified invoices’ for supplies under £250.

Debit and credit notes


If a taxable person returns goods to a supplier or a customer returns goods to the taxable person, the balance of payment can be settled with a credit or debit note. These should be recorded in the taxable person’s accounts and any original notes kept. Credit and debit notes must show the same information as the VAT invoice and:
* why it was issued;
* the total amount credited, excluding VAT;
* the number and date of the original VAT invoice.

VAT records should be kept for 6 years.

Further information, including details about the content of invoices and the ‘tax point’ (time of supply for VAT purposes), may be found at: https://www.gov.uk/vat-record-keeping/overview

[Value Added Tax 1994 sched.11; Value Added Tax Regulations 1995 Part V]

Record keeping requirements for companies and limited liability partnerships

Corporate records

Companies, limited liability partnerships(i) (LLPs) and Societas Europae must maintain certain statutory records including the following::

* Registers and minute book:
* Register of members (with an index if over 50 members unless the register operates as an index itself));
* Register of directors and secretaries (for companies);
* Register of debenture holders;
* Register of mortgages and charges on property;
* Copies of directors’ service contracts (or memorandum of terms if unwritten);
* Minutes of meetings of directors (keep for 10 years);
* Minutes of proceedings at general meetings (i.e. shareholders’ meetings) and resolutions passed (keep for 10 years);

* Register of people with significant control

Note (i): In the case of LLPs, members are the equivalent of both company diretors and members (i.e. shareholders).


[Companies Act 2006 and the Limited Liability Partnerships (Application of Companies Act 2006) Regulations 2009; Register of People with Significant Control Regulations 2016 (SI 2016 No. 339)]

Accounting records


Companies and limited liability partnerships must also maintain accounting records showing and explaining the company's transactions which disclose with reasonable accuracy, at any time, the financial position of the company and enable the directors to ensure that any accounts required to be prepared comply with the requirements of the Companies Act. Accounting records must in particular contain:

* entries from day to day of all sums of money received and expended by the company with descriptions
* a record of the assets and liabilities of the company;
* if the company's business involves dealing in goods: (a) statements of stock held by the company at the end of each financial year of the company; (b) all statements of stocktakings from which any statement of stock as is mentioned in paragraph; (c) except in the case of goods sold by way of ordinary retail trade, statements of all goods sold and purchased, showing the goods and the buyers and sellers in sufficient detail to enable all these to be identified.


Accounting records must be kept for 3 years (6 years in the case of a public company).

[Companies Act 2006 s.386/Limited Liability Partnerships (Application of Companies Act 2006) Regulations 2008 reg.8]

See GOV.UK pages on company and accounting records

Charities

Charities (other than charities constituted as companies and therefore subject to the Companies Act) must ensure that accounting records are kept containing:
(a) entries showing from day to day all sums of money received and expended by the charity, and the matters in respect of which the receipt and expenditure takes place, and
(b) a record of the assets and liabilities of the charity.
(Charities Act 2011 s.130)

[Page updated: 05/04/2016]

 

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