As Mums, we are used to dealing with paperwork left, right and centre, for school, the home, the endless lists….But what do we need to hang on to for our businesses? This blog will help guide you through the maze of what’s required.
Keep your financial records for 6 years
Do you need to go out and buy an enormous filing cabinet to keep the mountain of paperwork you will be inundated with? Not necessarily.
HMRC states that you should keep your financial records for 6 years in case they come to investigate your tax return. If they did appear on your doorstep (don’t worry, you’d get a letter first!), they would want to see the original records that went into the figures on your tax return. If you hadn’t kept your records for six years you may have to pay a penalty.
You must keep the original documents for anything showing tax deductions, for example P60s and bank statements. You can keep most other records electronically, as long as they are legible and show all the information on the front and back of the documents. These electronic files can be stored on CD, memory stick or any other suitable storage device. So, thankfully, there’s no need for that huge filing cabinet.
What you need to keep:
- Records to prove your income are items such as sales invoices, till rolls and paying-in slips.
- Records to prove your expenditure such as receipts, purchase invoices and cheque book stubs.
- If you are VAT registered you must also keep a VAT account, showing how you calculated the VAT due to or from HMRC, as well as VAT sales and purchase invoices and import and export documentation.
- If you are a limited company, you will also need to be able to show accounting records proving your assets and liabilities, as well as your income and expenditure. If you have accountant, he or she will be able to help you with this.
- If you are an employer, there are further record keeping requirements including all PAYE records, which in turn include employee benefits and statutory payments made.
How to keep your records:
1. Number each item e.g. you might number the first item you bought this year 001
2. Record each item and its number in the relevant book e.g.in your cash book, you would write ‘001’, the date you bought it and what the item cost. (See rules 2, 3 and 4 for more about the books you need).
3. Write the number (e.g.’001) on the receipt, invoice, till roll, paying-in slip etc itself.
4. File the receipt, invoice, till roll or paying-in slip numerically in a lever arch file (or plastic wallet for smaller items) so that they are easy to find in case of any query by suppliers or customers, or investigation by HMRC.
HMRC asks that taxpayers take reasonable care over their tax affairs. If you have made an error on your tax return, a clear filing system and helpful attitude to the investigators reduces the risk of a penalty.
Amy Taylor Accountancy takes every care in preparing material to ensure that the content is accurate and up to date. However no responsibility for loss to any person acting or refraining from acting as a result of this material can be accepted by Amy Taylor Accountancy You should always ask your accountant to give you specific advice which is tailored to your personal and business circumstances and properly implemented.