How long do small businesses need to keep tax records?

3. How to keep business records

There’s lots of information you need to keep – HMRC says you should also keep proof alongside your records, including all:

So it’s really important to have an effective filing system for all your business records. This should make everything easier when it comes to the tax-year end.

There’s accounting and invoice software available that can automate some of these tasks and keep your records in one place. For example, some apps let you scan and upload your receipts.

If you do end up losing your records, you need to tell HMRC whether you’re using estimated figures or provisional figures when filling in your tax return. Provisional figures are best estimates while you wait for the actual figures.

Here are some tips for record keeping:

• reconcile your accounts at least once a month – your income and expenditure records need to match up with your financial statements

• spend time creating and maintaining your filing system – you can break your paperwork down by year, quarter, or month, depending on what works for your business (but the important thing is to stay on top of filing and don’t procrastinate)

Record keeping for limited companies

1. Company records

While limited company directors will need to file a Self Assessment tax return, they’ll have more responsibilities than sole traders when it comes to record keeping.

That’s because the limited company legal structure is more complex, as it’s a separate entity.

This means you need to keep records of the company itself (not just financial records).

These include:

• directors, shareholders, and company secretaries

• shareholder votes and resolutions

• debentures (promises to repay a loan at a future date)

• indemnities (payments to make when things go wrong and it’s the company’s fault)

• transactions when people buy shares

• loans and mortgages secured against the company’s assets

You should also have a register of ‘people with significant control’ (PSCs). PSCs are likely to be people who have:

• more than 25 per cent of shares in the company

• more than 25 per cent of voting rights in the company

• the right to appoint or remove the majority of the board of directors

If you don’t keep your records in the same place as your registered address, you have to tell Companies House.