You should keep your limited company business records for six years from the end of the accounting period. Some documentation will need to be kept for 10 years, including the company’s statutory books and board meeting minutes. If you are self-employed, it is advised you keep records for at least five years.
Severe penalties can be imposed for businesses that fail to produce business and accounting records when requested by HMRC. These fines can potentially amount to several thousand pounds or more.
Lack of physical space in which to store records can be an issue for some businesses, but you can keep them digitally rather than in paper form if you wish – you just need to bear in mind that they must be clearly legible.
Exactly how long you need to retain your records depends on your business structure – essentially, whether you’re self-employed or run a limited company. If you’re an employer, regardless of your business structure, you also have certain liabilities when it comes to the retention of documents.
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If you’re self-employed
If you’re a sole trader or in an unincorporated business partnership, you need to retain your business records for at least five years after 31st January of the relevant tax year. These records include all sales documentation, business expenses, personal income, money paid into and withdrawn from the business, as well as VAT and PAYE information if applicable.
Being the subject of an HMRC investigation means you’ll need to retain these records until HMRC advises you otherwise. In all cases, the required records generally include bank statements, sales receipts, purchase invoices, cheque book stubs, and VAT documentation.
If you’ve received a government grant, you should generally retain the documentation for a period of four years from the date of receiving the grant.
The rules for limited companies are a little different, and there’s more documentation to consider. In addition to the records mentioned above, limited company directors need to retain other documents including but not limited to, details of business assets, liabilities, loans secured against the company’s assets, and shareholder transactions.
In general, company records must be retained for around six years from the end of the accounting period. But some documentation needs to be kept for 10 years, including:
The company’s statutory books (company registers need to be retained for the time the company is in business)
VAT MOSS (Mini One Stop Shop) records
The minutes of board meetings and resolutions
If you’re an employer
You must keep PAYE records for three years from the end of the tax year to which they relate. These include notices of tax codes, payments to employees and to HMRC, details of employee sickness and leave, any taxable expenses or taxable benefits.
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What happens if business records aren’t retained?
If any business records have been lost or stolen, you should inform HMRC straight away. They may request that you try to recreate the documents, but financial penalties of up to £3,000 can be applied if you fail to produce the required records when requested.