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A Guide to Documents That You

Must Keep
Business Information Factsheet
BIF272 July 2013

Introduction
All businesses, no matter what their size, must keep certain records and documents to ensure
they are operating legally. This includes tax, employee and health and safety records.
You need to keep certain documents as soon as you start your business, and must continue to
retain some documents on an ongoing basis. Proper tax records, in particular, must be retained.
Failure to keep the right documents relating to your business can cost time and money and can,
in extreme circumstances, lead to a jail sentence.
This factsheet details the essential records businesses should keep. It is not an exhaustive list
of all the records that every business should retain, but it highlights those that affect most
businesses. It also includes hints and tips and sources of further information.

Tax records that all businesses must keep


All businesses, whether sole traders, partnerships, limited companies or unincorporated
associations, must keep records of all receipts and expenditure for tax purposes. Traders in goods
must keep records of their sales and purchases of goods.
You should therefore record all sales and other business receipts as they come in, and retain the
records.
The exact records you keep will depend on the type and size of your business, but whatever
method you use must be adequate to complete a precise and accurate tax return.
There's no rule about the form your tax records must take; paper records are as acceptable as
electronic versions. In most cases, the tax authorities expect you to have:

Back-up records, such as bank statements and paying-in slips.


Invoices for purchases and other expenses.
A record of all purchases and sales of business assets.
A record of all amounts taken from the business account for personal use and paid in from
personal funds.

Many small businesses rely on a cash book to document all the money that flows into and out of
the business. To keep your cash book, you need to retain cheque stubs, cancelled cheques, bank
paying-in books, copies of your own and your suppliers' invoices, bank statements, receipts and
delivery notes, and receipts for all cash purchases and till rolls. See BIF 30, How to Keep a Manual
Cash Book for further information.

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HM Revenue & Customs (HMRC) makes specific recommendations for certain types of business. A
manufacturing business, for example, is expected to have:

Cash book.
Petty cash book.
Order notes and invoices.
Copies of sales invoices.
Details of any other business income.
Bills/invoices for purchases and expenses.
A record of stock on hand at the end of the year.
Details of bank and building society accounts used for business transactions.
Details of any private money brought into the business.
Details of money taken out of the business for your own or your family's personal use.
Details of any assets used for both business and private purposes.

Businesses that are not limited companies must keep records for five years from 31 January
following the tax year. Companies must keep their records for six years from the end of the
accounting period they cover. If HMRC enquires into the tax return, the records must be kept
until the enquiry ends.
Employers must keep records of wages and other payments to employees and HMRC may
inspect Pay As You Earn (PAYE) records.
Each failure to maintain or retain adequate records to back up a tax return can be penalised by a
fine of up to 3,000.

VAT documents
If you are registered for VAT you must keep records of all the supplies and sales you make and
receive, and a summary of VAT for each period covered by your VAT return. VAT records must be
kept for six years after the current year.
Many of the documents will be the same as those you keep for general tax and accounting
purposes, but you must also keep specific VAT accounts detailing all VAT transactions in
each accounting period and documents or certificates supporting special VAT treatment.
Requirements differ slightly depending on the nature of your business and whether you use a
special accounting scheme.
See BIF 234, An Introduction to VAT (Value Added Tax) for more information.

Record-keeping requirements for limited companies


All limited companies must keep accounting records, which must also be filed with Companies
House. Depending on the size of the company there are various exemptions available that define
the contents of a set of statutory accounts. Most accounts contain a directors' report, a profit
and loss account, and a balance sheet. This can be expanded to include an audit report, notes
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and consolidated group accounts. See BIF 69, A Guide to Preparing and Submitting Company
Accounts to Companies House for further information.
Limited companies also have specific record-keeping responsibilities. Not only must they keep
certain documents, some of the documents must be open to inspection. Any member of the
public is entitled to a copy of the company's register of members. Members of the company are
also entitled to inspect the minutes of its general meetings and to have copies of these minutes.
See BIF 23, A Guide to the Duties of a Company Secretary and BIF 25, Duties of a Company
Director for more information.

Employing staff
There are many document-keeping requirements relating to the employment of staff. In some
cases, retention periods are laid down by statute. In other cases, there is no formal requirement,
but you may need documentation to protect yourself from legal action. For instance, failure to
keep interview notes and other documents relating to an unsuccessful job application is not a
criminal offence, but may damage your chance of defending an action for discrimination at an
employment tribunal. It's suggested you keep such documents for a year.
Wage, salary and National Insurance (NI) records must be kept for six years. You must keep:

Paperwork related to employer and employee NI contributions.


Paperwork related to wages, hours worked, expenses and benefits paid to employees
including sick pay. These may be needed to prove compliance with the Working Time
Regulations 1998 and the National Minimum Wage Act 1998, and Statutory Sick Pay
regulations.
Records of accidents, injuries and dangerous occurrences to meet health and safety
requirements.
Bank statements or cash book records of payments.
Records of pension scheme payments.
Annual earnings summaries and documents connected with wage payments such as P35s
and P45s.

Disciplinary, working time, training and redundancy records should be kept for six years after
employment ceases for legal and reference purposes. An employee's file will also typically
include copies of previous P45s, their application for employment, the offer letter and the
contract of employment, details of performance appraisals and address and contact details.
Careful notes should be made of any disciplinary action and related meetings.
Some other staff-related documents must be retained for periods set down by law:

Accident reports must be kept for three years after the date of the last entry. There are also
rules on recording injuries caused by hazardous substances (go to www.hse.gov.uk).
Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP) and Statutory Sick Pay (SSP)
records must be kept for three years.
Wage records must be kept for six years to ensure you meet the requirements of the
National Minimum Wage Act 1998.

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Medical records and details of biological tests under the Control of Lead at Work Regulations
1998, the Control of Substances Hazardous to Health Regulations 2002 (COSHH) and the
Control of Asbestos Regulations 2006 should be kept for 40 years from the date of the last
entry.

In addition:

Health and safety records of consultations should be kept permanently.


It is no longer a legal requirement to keep copies of insurance certificates after they have
expired but it is good practice to keep a record of the details of all insurance, in case of
claims against you in the future.
Trade union agreements should be kept for ten years after they cease to be effective.
You may want to keep permanent records of senior executives and minutes of trustee and
works council meetings.

Employing migrant workers


Employing someone who isn't legally entitled to work in the UK is an offence punishable by a
maximum fine of 10,000 per employee.
To safeguard against prosecution, you need to keep and retain either:

A copy of the employee's passport showing either that he or she is a British citizen or has the
right of abode in the UK, or
A P45 or P60 accompanied by a full birth certificate or certificate of registration, or certificate
of British naturalisation or a letter or document from the Home Office indicating that the
holder can stay indefinitely in the UK or has no time limit on their stay.

When copying passports, you should copy the front cover and pages with photographs,
signatures, personal details, document expiry dates and those carrying a UK Government stamp.
Copy other documents in their entirety. Keep copies throughout the period of employment and
for at least three years after the employee has left.
To avoid breaching equality legislation, the Home Office recommends you also check the
entitlement to work of all prospective employees, not just those you suspect of coming from
outside the EU.
A job applicant's original documents such as a passport should not be kept for longer than a day.
The UK Border Agency may examine your right to a defence if they detect anyone working
illegally for you. If you lose your copies, your normal recruitment procedure may be taken into
account. Go to www.ukba.homeoffice.gov.uk and see BIF 336, How to Employ Someone from
Outside the UK and EEA for more information.

Data Protection Act


Your record keeping has to comply with the Data Protection Act 1998. You should ensure that
anyone who has access to employment records is aware that data protection rules apply and that
personal information must be handled with respect.

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Check which records are kept about your employees and make sure you are not keeping
information that is irrelevant, excessive or out of date. You should delete any information for
which you have no genuine business need or legal duty to keep. Let workers check their own
records periodically so that mistakes can be corrected and information kept up to date.
Be careful when disclosing information in a worker's employment record. Remember that those
asking for information about workers may not be who they claim to be.
Data protection doesn't affect cases where you are legally obliged to disclose information, for
example, informing HMRC about payments to workers. You should nevertheless be careful not to
disclose more information than required.
You should keep information about workers' health particularly secure. This might mean allowing
only one or two people to have access to a password-protected computer file, or keeping it in a
sealed envelope with an employee's file.
Workers have a legal right of access to information you hold on them. This includes information
about grievance and disciplinary issues, and information you obtain through monitoring.
Normally you must give access within 40 days if requested, although you may legitimately
withhold information for reasons of crime prevention. You should have arrangements in place to
deal with access requests properly and within the time limit.
For more information see BIF 3, A Guide to Complying with the Data Protection Act.

Hints and tips

Keep paper records secure, preferably off site and in fire-resistant cabinets.
Use password protection for computerised records and remember that regularly backing up
computer records and keeping them off site or remotely is essential.
When you no longer need records, dispose of them securely, for instance, by shredding.

Further information
For practical start up and small business tips, ideas and news, go to:
Website: www.enterprisequest.com
To access hundreds of practical factsheets, market reports and small business guides, go to:
Website: www.scavenger.net
BIF 3 A Guide to Complying with the Data Protection Act
BIF 24 Keeping Sales and Purchase Ledgers
BIF 30 How to Keep a Manual Cash Book

Legal publications
'A general guide to keeping records for your tax return'
HM Revenue & Customs (HMRC)
Website: www.hmrc.gov.uk/sa/rk-bk1.pdf
'Keeping records for business - what you need to know'
HM Revenue & Customs (HMRC)
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Website: www.hmrc.gov.uk/factsheet/record-keeping.pdf

Useful contacts
HM Revenue & Customs (HMRC)
Tel: 0300 200 3200 (Employer's Helpline)
Tel: 0300 200 3700 (VAT National Advice Service)
Website: www.hmrc.gov.uk
The Health and Safety Executive (HSE) produces a wide range of information and guidance on
health and safety best practice. It also produces specialist guidance for small and medium-sized
businesses.
Website: www.hse.gov.uk
The Health and Safety Executive Northern Ireland (HSENI) is the health and safety body for
Northern Ireland.
Tel: 0800 032 0121
Website: www.hseni.gov.uk
The Information Commissioner's Office (ICO) is responsible for enforcing the Data Protection Act
1998. It provides information and advice about how to retain confidential records securely.
Tel: 0303 123 1113
Website: www.ico.org.uk

DISCLAIMER While all reasonable efforts have been made, the publisher makes no warranties that this
information is accurate and up-to-date and will not be responsible for any errors or omissions in the information
nor any consequences of any errors or omissions. Professional advice should be sought where appropriate.
Cobweb Information Ltd, Unit 9 Bankside, The Watermark, Gateshead, NE11 9SY.
Tel: 0191 461 8000 Website: www.cobwebinfo.com

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