Limited company accounts – keeping accurate records

Record keeping is vital for every incorporated business. If you do not keep the right records for the correct length of time, HMRC can fine your company £3,000 or disqualify its directors for up to 15 years. Even if these penalties only apply in extreme cases, they illustrate the importance of the task.

As important as it is for you (the company’s officers) to focus on the day-to-day running of your business, it is just as important that you pay attention to what records are being kept and whether these are fully compliant with HMRC requirements.

In reality, most company directors work closely with their accountants to keep accurate and secure records, a task made far easier these days by the widespread use of online accounting software.

What records do you need to keep?

There are two categories of records that must be kept.

1. Accounting records

Your accountant will complete your Company Tax Returns (submitted to HMRC), and Annual Accounts (submitted to HMRC and Companies House).

You will, therefore, need to keep all records and calculations to support what you have filed in these returns, including details of:

  • Money spent by the company (e.g. receipts, delivery notes, petty cash records).
  • Money received by the company (e.g. invoices, till rolls, sales records, contracts).
  • Any other financial records that support these figures (e.g. bank statements).

Other than these, you will also need to keep a record of the following:

  • What assets are owned by the company (e.g. cars, buildings, machinery).
  • An inventory of stock left at the end of the company’s financial year.
  • Stocktakings used to work out that inventory.
  • All goods that the company has bought or sold.
  • Who the goods were bought from and sold to (this is not necessary if your company is a retail business).
  • All money received by the company.
  • All money spent by the company.
  • Any debts owed by or to the company.

2. Company records

How often your company records will need to be amended depends largely on the nature of your business and how often changes occur within your structure.

They must always be kept up-to-date, though, so be sure to update them if there are any changes, and routinely check periodically that they are accurate.

The records should normally be kept at the company’s registered address – if not, you will need to tell Companies House where they are kept.

The company records you must keep are:

  • Details of your directors, company secretary (optional) and shareholders.
  • Loans or mortgages taken out by the company or secured against the company’s assets.
  • “Debentures” (promises to repay loans on a specified date) and “indemnities” (promises to pay money if the company does something wrong).
  • Any resolutions and votes made by the shareholders (usually at AGMs or EGMs).
  • Details of any transactions involving someone buying shares in the company.

You must also keep a “PSC Register” – this is a record of People with Significant Control – details of anyone who has more than 25% of shares or voting rights in the company, has control or influence over the company, and/or can remove or appoint a majority of directors. Even if there are no PSCs, you should keep a record of this fact.

Details of your company’s PSCs should be submitted to Companies House via your Confirmation Statement.

How long records must be kept for?

Normally, your records must be kept for six years, starting at the end of the company’s financial year they relate to. Sometimes, they will need to be kept for longer, if for example:

  • A compliance check has been instigated by HMRC.
  • The records include transactions that cover more than one accounting period.
  • They relate to a purchase made by the company that is expected to last for longer than six years (e.g. plant and machinery).
  • Your Company Tax Return has been filed late.

If and when you are ever required to produce records that have been lost, damaged or destroyed, you will have to state this in the Company Tax return, tell the Corporation Tax office immediately and then try to recreate them (using other records that may have survived).

As mentioned earlier, the popularity of online cloud-based accounting systems is likely to make uploading and safely storing important records far easier than it used to be decade ago.

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