Summary
- Business records are documents that record your company’s activities, including financial transactions, ownership details and key decisions.
- UK law requires you to keep records such as accounting data, shareholder details, and meeting minutes to ensure transparency and compliance.
- Most records must be retained for at least six years, with some (like company registers and minutes) kept for up to ten years.
- This guide explains business record requirements for business owners in the UK, outlining legal obligations and retention rules, prepared by LegalVision, a commercial law firm that specialises in advising clients on corporate compliance.
- It provides a practical explanation of what records to keep, how long to retain them and the risks of non-compliance.
Tips for Businesses
Keep accurate and organised records of finances, ownership and decisions. Store them securely but ensure they are accessible if required. Follow retention periods carefully, especially after closing a business. Poor record keeping can lead to fines, disputes and compliance issues.
Business records are the documents and information your company must keep to track its operations, financial position and legal obligations. For your business, poor record-keeping can lead to HMRC fines, failed audits and increased legal risk, particularly if you cannot evidence transactions, ownership or compliance when required. You must retain accurate records for prescribed periods, often at least six years, and ensure they are accessible for inspection or investigation. This article explains what business records you must keep, how long to retain them and the risks of non-compliance.
General Overview
Her Majesty’s Revenue and Customs (HMRC) requires you to keep accurate records when operating your business, regardless of whether you are a sole trader or a limited company. While you can hire a professional (e.g., an accountant to help with your taxes), you remain responsible for maintaining accurate records. HMRC may conduct compliance checks to ensure you are paying the correct amount of tax.
However, keeping your documents can be space-consuming. Paper records, in particular, can be a significant issue for businesses with limited space. Keeping those documents after your business has closed down can be a hassle. As an alternative to paper records, you can store your records digitally. The only requirement in this regard is that the records have to be clearly legible.
Therefore, we recommend that you scan all paper records to store them as digital records. You should also make sure they are filed and backed up to avoid the risk of losing records (and potentially having to pay a fine to HMRC).
You will also be required to retain some of those records for a specified period if your business closes. If you fail to do so, HMRC can impose fines as a penalty. HMRC fines can be in the thousands of pounds, so it is essential to keep all relevant documents. The length of time you must keep your records depends on whether you are self-employed or run a limited company.
What if I Am Self-Employed?
If you are self-employed, a sole trader, or if your business is unincorporated, you are required to retain your records and documents for five years following the deadline for submitting your tax return for the relevant tax year. The tax return deadline is on 31 January. This means that if your business closes down in the 2016/2017 tax year, you will need to keep your documents (which you submitted as part of your tax return on 31 January 2018) until 31 January 2023.
The documents you must retain will include:
- sales documents;
- personal income;
- bank statements;
- purchase invoices;
- business expenses; and
- VAT information (if available).
If you are subject to an HMRC investigation, you will need to keep those records until HMRC tells you otherwise. If you are unsure, it is advisable to contact HMRC to confirm your obligations.
Continue reading this article below the formCall 0808 196 8584 for urgent assistance.
Otherwise, complete this form, and we will contact you within one business day.
What if I Am Closing a Limited Company?
If you are running a limited company, you must keep detailed records about the company itself, as well as financial and accounting records.
Records about the company must include:
- details of directors, shareholders, and company secretaries;
- results of shareholder votes and resolutions;
- promises for the company to repay loans (‘debentures’);
- promises the company makes for payments if something goes wrong (‘indemnities’);
- transactions occur when someone buys shares in the company; and
- loans or mortgages secured against the company’s assets.
You must also maintain a register of ‘people with significant control’ (PSC).
Accounting records must include:
- all money received and spent by the company;
- details of assets owned by the company;
- debts the company owes or is owed;
- stock the company owns at the end of the financial year; and
- all goods bought and sold (with details of buyers and sellers, unless you run a retail business).
You should also keep records for longer than six years if:
- they show a transaction that covers more than one of the company’s accounting periods (so the six year period starts to run from the end of the latest accounting period that the records relate to);
- your company has bought something that it expects to last more than 6 years, like equipment or machinery; and
- you sent your Company Tax Return late.
You must retain documentation for ten years, rather than six, if you operate a company. These include:
- the company’s statutory books (you must keep the company’s register while your business was in operation);
- VAT Mini One Stop Shop records; and
- any minutes of board meetings and resolutions.
What if I Lose My Records?
If you lose your records, please notify HMRC immediately. HMRC will usually ask you to try to retain or reproduce some of those lost documents. For example, you can obtain bank statements by contacting your bank. If you fail to produce some documents when requested by HMRC, you may be liable for a fine. The fine can be up to £3000.
HMRC is more likely to be accommodating if you notify them as soon as possible after losing your documents. However, they are unlikely to be as understanding if you declare that you have lost your records midway through an investigation.
Understand your role as a director and how to meet your legal obligations. Download our free guide today.
Key Takeaways
Keeping records of your business, especially after closure, is highly important to avoid potential fines from HMRC. If you are self-employed, you will want to ensure that you retain relevant documents for six years after your business closes. However, if you are running a company, you will want to keep most of your documents for seven years, and you must keep several for ten years. However, the rules for maintaining business records will vary depending on your business structure and the nature of your company. Generally, for sole traders, the documents that you should retain include:
- sales invoices;
- bank statements; and
- business expenses.
If you need help keeping records after business closure, LegalVision provides ongoing legal support for businesses through our fixed-fee legal membership. Our experienced business lawyers help businesses manage contracts, employment law, disputes, intellectual property, and more, with unlimited access to specialist lawyers for a fixed monthly fee. To learn more about LegalVision’s legal membership, call 0808 196 8584 or visit our membership page.
Frequently Asked Questions
You should retain your documents for six years after closure in normal circumstances, which would cover the five-year requirement, which runs from the date you need to submit your last tax return on 31 January after the end of the relevant tax year. However, if HMRC is investigating you, you will need to keep them until HMRC says otherwise.
No. You can keep digital records, provided they are eligible.
You must keep records of income, expenses, assets, debts and stock, as well as details of goods bought and sold. These records support your tax and accounting obligations.
If you fail to keep proper records, HMRC can impose fines, potentially reaching thousands of pounds. This creates financial and compliance risks for your business
We appreciate your feedback – your submission has been successfully received.
