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Keeping Records for the Inland Revenue (HMRC)

You must keep records of all the financial transactions in your business so that you will be able to complete your tax return to the Inland Revenue and you must keep these records for at least five years from the latest date for sending back your tax return.

Set up a record system that suits the needs of your business and keep your records throughout the year – don’t let the paperwork build up. You can get further advice from your local Tax Office or from your accountant, if you have one. Having an accountant can save you money. There are three key points to remember in relation to keeping records for the HMRC.

Point 1: Set up a record system. The sort of records you keep will depend on your business. It doesn’t matter whether you use a special account book or a software package as long as you set up some kind of system to keep the information together. Make sure the system you choose is geared to your business, and simple to use. The minimum requirement for most types of business will be a cashbook (a summary and analysis of all bank account entries, cash receipts, payments and drawings) a petty cash book (or some other simple record of your petty cash transactions). If you run a large business, you may need other account books. If you keep your records on computer, you’ll still need to keep the original paper invoices or other records of sales, purchases and similar transactions, unless you use an optical imaging system or microfilm all your originals. You can get further advice from your local Tax Office or from your accountant, if you have one. See links.

Point 2: Keep records throughout the year. Keeping only some of your records is almost as bad as keeping none at all. Update your records regularly, rather than letting the paperwork pile up.

Point 3: Keep your records for at least five years from the latest date for sending back your tax return. You may need to look back at them yourself, and the Inland Revenue may need to see them if there is any question over your tax.

Having an accountant can save you time and money. They can help you by filling your forms for you and giving up-to-date advice on what suits your business best. It is a good idea to speak to two or three before you appoint someone, to ensure you are getting the best service for your business.

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