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If you own a business, whether that be a limited company, self-employed, sole-trader or freelancer, you must keep financial company records for a certain period of time. The time frame depends on what type of tax you pay.
Limited companyIf you own a limited company, you will need to keep your financial records for a minimum of six years, from the end of your current accounting period.
Company directorIf you are a company director you must file a self-assessment annually and pay any outstanding personal tax on your dividends or income.
Umbrella companyIf you are an umbrella contractor, you will only need to keep personal tax records as you are an employee of the umbrella company, not a business owner.
EmployerIf you are also an employer you will need to keep all PAYE records for 3 years, including the current financial year. If you operate through your own company and pay yourself a salary (plus others too), you are classes as an employer
What is a document?In today’s modern paperless society, documents do not have to be in the physical paper form, although many companies do still have this in place. A document can be in electronic form, for example bank statements or supplier invoices may be sent electronically and these are still considered to be documents. It may even be a webpage or an electronic file. All of these forms of documents are acceptable and must be kept for the required amount of time. If using a paperless system, the system must be able to keep the records for the given amount of time and be able to provide hard copies should they be required.
What documents should you keep?Not all documents that a business receives are required to be kept for years, as this would amount to much needed storages as time goes on, but there are certain common documents that must be kept. If a hard copy has been provided, these should be kept on record as an auditor may wish to see these at any time.
Document time scales:Permanently:Fixed asset registerAnnual accountsTen years:Minutes of directors or shareholders meetingsSix years:Sales invoicesPurchase invoicesPetty cash recordsTax code changesTax records for an employee leaving the companyPayrollContracts with customers, agents and suppliersThree years:Insurance documentsStatutory maternity pay recordsStatutory sick pay recordsNational minimum wage recordsTwo years:Records relating to working timeOne year:Application forms and interview notes
Why should you keep company records?Company directors are duty-bound to keep adequate business records which show the financial position of the business at any given point in time. The Companies Act only requires the financial position to be one of ‘reasonable accuracy’ so it does not have to be absolute, but if the accounting records are not kept in an orderly manner, the directors may be committing an offence under the Companies Act.
The problem comes when records are not kept orderly and become messy as it can be time-consuming and often expensive to put them back in order and on track. This is where an accountant or bookkeeper is the key. Passing financial documents to an account to keep bookkeeping records up to date and accurate will help a business stay current in their affairs. Most business owners are pretty good at keeping hold of records, but sometimes not great at keeping them in order.
An accountant can keep the following records for you:• Copies of company financial records• Working notes of how financial figures have been calculated• Corporation tax returns• Director self-assessments tax returns• Company administration documents, such as dividend paperwork, annual statements, share registers and transfer forms.
If you’re a limited company contractor needing a helping hand when it comes to keeping financial records, we’d be happy to talk with you and get you on track ready for the new year. Get in touch for more information.