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Limited Company Record Keeping
As a limited company, you are legally required to keep certain records. These records help to show HMRC that you are paying the right amount of tax and National Insurance, and they can also be used to prepare your company accounts.
Good record-keeping will help your business become more efficient and provide opportunities for growth. This practice is more important than ever now that cloud-based accounting software is available for smaller business owners.
So, what records do you need to keep and for how long? This blog post will take you through the basics of limited company record keeping, so you can be sure you are compliant with regulations.
Company Records
Operating as a limited entity, you are required to keep certain records of the company itself.
Typically with this type of structure, there will be more information and records that you need to keep, as limited companies are under more scrutiny than other entities, such as self-employment.
These records will show information such as the people involved with the company, like directors or shareholders, and any significant information regarding the company’s operations, like board meetings and resolutions.
Usually, these records will be kept at the company’s registered office, which in most circumstances, will be your accountants or tax advisers.
However, if your records are in fact kept elsewhere, you will need to inform Companies House.
Here is a full list of the company records you must keep as a limited company:
- Directors
- Shareholders
- Company Secretaries
- Register of ‘people with significant control’
- Results of shareholder votes and resolutions
- Indemnities (Promises the company makes payments if something goes wrong)
- Debentures (Promises for the company to repay loans at a specific date)
- Loans
- Mortgages
- Share transactions
- Company minutes
- Directors’ service contracts
- Memorandum and articles of association
- Share certificates
- Other documents relates to secured loans
If your limited company has no people with significant control, this will also need to be recorded.
The transactional records you need to keep will be related to the money the company has received or spent.
You will need to keep:
- Goods and services brought by the company
- Company assets
- Company liabilities
- Company credits
A limited company will also need to keep details of the stock that it owns at the end of each financial year.
You will need to record:
- Stocktakings
- Goods brought
- Goods sold
- Supplier information
- Customer information (except if you are in the retail industry)
Amongst other information, you will need to keep any transactional and financial records that will help in the production of your annual accounts or Company Tax Returns such as:
- Money received including any grants or support schemes
- Money spent
- Receipts
- Petty cash books
- Delivery notes
- Invoices
- Contracts
- Sales books
- Till rolls
- Bank statements
In addition to keeping limited company records relating to the financials of the business, you will also need to keep hold of any records relating to personal income.
This could be things such as bank statements, cheque stubs, or payslips.
Employment Records
If you are an employer, you must keep records relating to the running of your payroll scheme and any other PAYE information.
This typically includes records such as tax code changes or payments made to your employees.
Considering the large number of changes that a company payroll scheme can face throughout the year, such as tax codes, pensions, pay adjustments, and any documents relating to an employee such as a P60, employment record keeping can become a hefty task.
Directors will need to keep hold of all of this information to ensure they make the correct claims.
In some circumstances, employees can receive allowances through your payroll scheme, such as tools, travel or protective clothing.
So you will need to keep a record of any receipts of transactional records relating to these claims.
A full list of the employer records you must keep are as follows:
- Statutory pay
- Maternity Pay
- Paternity Pay
- Adoption Pay
- Statutory allowances
- Employee documents (P60, P45, etc.)
- Payments you make to HMRC
- What you pay your employees
- Taxable benefits
- Taxable expenses
- Tax code notices
- Reports or documents sent to HMRC
- Payroll Giving Scheme
- Other documentation relating to absences
Investment Records
If your limited company has made investments, you will need to keep any information or records relating to such.
These records will often show the profit or loss a company has made on the investment, and documents relating to the purchase or sale of it.
Where possible, you should keep as much information as you can regarding your investments, such as:
- Bank statements
- Statements of income
- Dividend vouchers
- Tax vouchers
- Chargeable event certificates
- Invoices
- Allowance expenses
- Important dates
It is important to keep these records for any investments as if a profit is made, you may have to pay Capital Gains Tax on their sale.
The records you keep will help in calculating the Capital Gains Tax and ensure you are paying the correct amount.
How long does a limited company need to keep records?
A limited company must keep accounting records for at least 6 years from the end of their last financial year.
Records relating to the company itself must be kept for the entire lifetime of the company.
In some cases, accounting records may need to be kept longer if:
- You sent your Company Tax Return late
- The records show a transaction that covers more than one accounting period
- The company has made a purchase of an item that is expected to last longer than 6 years; such as equipment or machinery.
With Making Tax Digital (MTD) in full force, keeping records has become easier for many businesses.
Any limited company that is using the latest accounting software will be able to take regular backups of their data.
This helps avoid mishaps such as data corruption or theft and makes it easier to keep hold of these records, especially with larger companies.
If your records or lost, stolen or destroyed
In some unfortunate cases, limited company record keeping can be affected by theft or destruction.
In situations like these, HMRC requests that you do your best to recreate any of the lost records.
You can do so using provisional or estimates figures if you do not have the ability to recreate the exact records.
You will need to inform your Corporation Tax Office straight away.
Once you have recreated as many of the records as possible, you will need to include this information in your Company Tax Return.
You can do so by using the ‘any other information’ to let HMRC know what you are doing.
If your recreated or estimated records turn out to be incorrect, you will not need to pay any interest or penalties on unpaid tax.
Where to keep limited company records
Limited company record keeping is usually carried out at the business’s registered office address.
Typically this is your accountant’s place of work, where they will store your records and information in a secure environment.
If your records are kept in digital format, such as on a cloud-based accounting software, it is best to store them on a secure server where they are unlikely to get lost, stolen or damaged.
Again, if you have an accountant, this is something they will do for you.
If your records aren’t kept at your registered office, you will need to make sure you inform Companies House.
Though your records should be stored safely, you will also need to make sure they are immediately accessible and can be produced for inspection at any time if required.
Fines and Penalties
Proper record-keeping for limited companies needs to be carried out throughout each financial year.
Failure to keep the correct records for your business can result in fines and further action if necessary.
If you do not keep accounting records, HMRC can fine you £3,000 and in some cases, disqualify you as a company director.
Penalties can also be issued if HMRC finds you to have deliberately destroyed records.
These penalties can range from £250 for a business in its first year, to £3,000 for others.
HMRC also has the right to check your records to make sure you are paying the correct amount of tax.
If it finds that you have underpaid or underreported, you will be fined for unpaid tax, and interest will be charged on this amount.
You may also be charged up to £3,000 if you do not produce records that have been requested by HMRC.