Every business needs to submit information to HMRC – whether it is quarterly because you are VAT registered, weekly/monthly because you are an employer, or at the end of the tax year when your tax returns are due.

To submit that information, you need to have accurate and complete accounts, and you cannot do that without ensuring you have all the documentation that backs up your transactions.  If you are just starting out in business, getting processes in place for ensuring that you store your receipts and invoices properly from the start is very beneficial.  If you are a business that has been going for a couple of years or more, and you don’t have any processes in place for your record keeping, it isn’t too late to start – the important thing is that you do make a start on sorting out those processes and follow them.

The great thing is, that now HMRC don’t require you to keep your receipts and invoices in paper format, you can now keep them in a digital format!  HMRC still do require you to keep some items in paper format, such as your C79 VAT Import Certificate, but all your receipts and invoices can be kept digitally.  Being able to store this information digitally makes it a lot easier for you.

Here are some tips that will help you to keep your records.

• On your computer, on a cloud-based system like Drop Box, Google Drive, One Drive – set up a file system to store your receipts in. Create a folder for each tax year, and within that folder, for each month.  As soon as you are e-mailed a receipt, save it to the correct folder.

  If you have services that you are invoiced for regularly, but don’t get those invoices e-mailed to you, make sure you go to the online portals each month, download the invoice, and save them to the right folder.  Look at building this into your regular month-end routine.

  If you get any receipts/invoices in paper format, scan them, or snap a photo of them, and make sure you upload them to the right folder.

  Just an additional note, make sure that you have a backup copy of your digital records, just in case something happens to the original.  For example, you could save the documents to an external hard drive, but also upload them to a cloud-based storage solution.

• With a lot of the cloud-based accounts software, you can attach a copy of your receipts/invoices to the transaction. Make sure you do this as it is a great way to ensure that you have all your paperwork, and it makes it much easier to find it if you need it again.
• If you have a bookkeeper or accountant who does the bookkeeping work for you, send them your receipts/invoices as soon as you get them so that they can keep your accounts up to date. They may have a process set-up to allow their clients to send the information to them, so make sure you know what those processes are and how to get the documents to them.  For example, I ask clients to upload their documents to specific folders on Accountancy Manager, or to e-mail them to a specific e-mail address.
• Cloud-based accounts software like QuickBooks Online, have in-built receipt capture software that allows you to send/upload receipts to attach to the transactions. There are also 3^rd party apps like AutoEntry, Dext and HubDoc that allow you to upload/e-mail/photograph receipts so they can be attached directly to your accounts.  Look into whether either of these methods are an option for you as it is a great way to help store your documents safely, but it also helps with attaching the document to the transaction in your accounts, making the process more streamlined.

Get into the habit saving your documents and sending them to your bookkeeper/accountant on a regular basis.  This will help to ensure the paperwork doesn’t get lost, that you don’t forget what something is for, and helps keep your accounts up to date.

How long do records need to be kept?

For a sole trader, their financial records must be kept for 5 years.  For a limited company, they must be kept for 6 years.

You will need to keep the documents from January 31^st after the tax year ends.  For example, for the 2022/2023 tax year, you need to keep the records for 5 or 6 years from January 31^st, 2024.  This takes into consideration the fact that the annual tax return doesn’t need to be filed until January 31^st following the end of the tax year.

HMRC can do an inspection on a business at any point in time, and they can ask for proof of transactions dating back to 2 previous decades, so even if you only need to keep your records for 5 or 6 years, it might be an idea to hang onto them for a lot longer just in case.

Why is it important to keep good records?

There are several reasons why a business should keep good records, especially when it comes to their accounts, but I will just touch on a few of them.

• It allows your accounts to be kept up to date and ensure that they are accurate which then allows you to make better informed business decisions. For example, do you need to register for VAT, did the marketing campaign work, can you afford to hire staff?
• It helps with your cash flow. You will be able to see who owes you money and who you owe money to much easier.  This will allow you to plan for future expenses the business will have.
• It reduces your stress levels. If all the documents are kept and given to your bookkeeper straight away, you won’t be trying to find it 12 months later when your tax return is due.  You will also be better able to answer any questions about what a transaction is for.
• It helps with HMRC inspections. You will be able to give the inspector the information they ask for quickly and easily.  It can also help to reduce any errors HMRC are looking for.

If you have any questions about how you can ensure that you are keeping good records for your accounts or would like to talk about how I can help you with your accounts, feel free to e-mail me on info@ihelm-enterprises.co.uk.

Guest Blog by:

Arianna Helm arianna@ihelm-enterprises.co.uk
Company Name: Ihelm Enterprises Limited
Website / link: https://www.ihelm-enterprises.co.uk