Keeping Company Records
If you are a Company Director, you have a legal responsibility to ensure up-to-date, accurate records of your company and all related accounting are kept. You of course do not have to do this yourself – an appointed accountant can do this – however, it is your responsibility to ensure that if you are not doing this, a qualified other is and that these records are kept up-to-date.
You must keep Company Records for at least 6-years from the end of the last financial year. However, if there are transactions/payments that have lasted longer than this, you must ensure complete records for these are kept. This also applies to any item the business has purchased and which it predicts will remain an asset for longer than 6-years, such as I.T. equipment or heavy machinery. You may also be requested to provide records for years other than the previous six if you submit your Company Tax Return late to HMRC. Keeping such records of course takes commitment, whilst also presenting other problems such as storage. To help you get a better understanding of what is involved in keeping Company Records, we have put together the following information:
Where to store Company Records
One practical issue you may be worried about regarding keeping your Company Records, is having the storage space to store such a large amount of documentation. Whilst this was still a major issue for companies even until recently, advances in technology now means that most companies store their Company Records digitally. What this means is that practically an infinite amount of such documents can now be stored somewhat easily. Requiring much less storage space, it is now considerably cheaper to store Company Records – making it great news for businesses. If you do not already record and store your Company Records in digital format, you should consider doing so as soon as you can. As a business, you must ensure that all such digital information is secure and backed-up so as to protect against any possible damage or corruption to the files.
Failing to keep Company Records
If you fail to keep accurate records of your company’s operations, or do not have the covering the required length of time, you could suffer a penalty by HMRC. Such penalties begin with small fines and rise in size depending on severity. For example, a new business may only incur a £250 fine for an honest mistake, whilst a company found to have deliberately withheld or destroyed records could be hit with a fine of up to £3,000. In serious cases, HMRC has the power to disqualify a Company Director if that person has been found to have seriously failed in their duties as a Company Director. Such a disqualification can last for a number of years.
Benefits of keeping good Company Records
Whilst keeping Company Records may at first seem like a difficult, thankless task, there are in fact a number of very useful benefits associated with keeping detailed Company Records. To help you better understand what you should keep Company Records, we have put together some of the main benefits of doing so:
- Enables you to make the most of the expenses you claim and reduce your tax obligations
- Protects you should your business be investigated by HMRC
- Simplifies the Year-End accounts process for your business
- Provides important information that can help your business grow as well as helping to identify areas of strength and weakness
- Eliminates any nasty sudden tax surprises by ensuring you do not under or over-pay tax
- Helps you to better plan for short and long-term financial commitments
- Enables you to take out business loans much more easily
- Makes it easier to identify whether your business must pay VAT to HMRC
As you can see, there are numerous benefits to keeping a detailed record of all company transactions. Whilst it may seem daunting at first, if you persist with it, it will simply become like a habit – a habit with the potential to save you money and give your business the very best chance of succeeding.
Benefits of Digital Company Records
As already mentioned, there are numerous benefits to having your Company Records kept in digital format. Not only will it significantly reduce the space and finances required to store such documents, but it enables you to keep a much better track of what is going on and just as importantly, it enables you to quickly and easily access your business records with nothing more than the click of a button. Being able to view such records easily, allows you to make much more informed business decisions, as well as enable you to make improvements quickly and in real time – a crucial advantage in modern business which demands rapid flexibility so as to cater to ever-changing market trends. Secure and safe from loss or damage, having digital copies of your business’ Company Records will also make it much easier to comply with HMRC requirements, as well as filing reports and meeting requests for financial records.
Good luck!
Keeping detailed Company Records may seem daunting at first – especially for new businesses. With so many different records to keep you may not know where to begin. You are advised to split such records into smaller, easier-to-manage tasks at first, rather than trying to take on everything at once. Once you have done this, you will find it easier to then update each one when required. As a business, you are required by law to keep such records, and it is, therefore, your responsibility to ensure this. We hope the above information has provided you with a little insight into Company Records and given you a few useful tips as to how you can get started and make this law work for you and your business.
