A Guide to Accounting Records Retention for Companies

What are your legal responsibilities?

Every person who is a director or on the board of directors of a UK company should be aware of their legal responsibilities regarding accounting records retention. These responsibilities are mandated by the Companies Act 2006.

The Companies Act 2006 stipulates that all companies operating in the UK must have adequate, accurate accounting records, be able to produce them on demand and keep them for a designated period of time. These regulations are overseen and enforced by His Majesty’s Revenue and Customs service (HMRC).

The accounting records must be able to:

• Detail and explain the company’s past transactions
• Show the current financial situation of the company
• Be easily retrieved by directors or owners if required to satisfy HMRC requests

What accounting records does a company need to keep?

Your company should maintain and keep detailed records of who is involved in running the enterprise and up-to-date accounting records. 

Company records

• Information about all directors, shareholders and company secretaries
• Details on shareholder votes and resolutions
• Details on loan repayments and the details of lenders
• Information on any payments the company pledges to make if found culpable for wrongdoing or defaults
• Details of transactions where a person buys shares in the company
• Information on any loans or mortgages obtained using company assets as security

HMRC also requests that a register be maintained on ‘people with significant control’ (PSC). These individuals must own 25% shares in the company or have voting rights, be able to remove or appoint directors and can control or influence the direction of the company.

Accounting records

The accounting records that a company must maintain and keep include:

• Details of all income and expenditures
• Information on all current and fixed assets owned by the company
• Details on any debts or liabilities 
• All stock that the company owns as of the end of the financial year
• The stocktaking calculations used to arrive at this figure
• Details on all goods purchased and sold 
• Details on who purchased the goods (retailers are exempt)

A company must also keep a record of all information, calculations and financial statements used to prepare their tax returns and annual accounts. These documents include:

• Till rolls, sales books, contracts and invoices
• Receipts, petty cash books, orders and delivery notes
• Bank statements, financial correspondence and any other relevant documents

Company directors have a legal responsibility to ensure account records and journals are created, maintained and retained. Penalties for not maintaining accurate account records, not keeping the records or not being able to produce them on request can be up to £3,000 per tax year. A company director can also be disqualified from their position by HMRC if found to be in breach of the law.

How long should a company retain its accounting records?

Companies must retain company records and accounting records for six years as of the end of the financial year. In reality, this requires companies to keep their records for seven years in total. 

Accounting records are required to be kept past this statutory period if a tax return was submitted late, the company has an asset that will last longer than six years, a transaction goes over more than one accounting period, or HMRC is conducting a compliance investigation. It is recommended that important documents and contracts be kept for longer than the minimum statutory periods. These documents can include annual financial statements and a copy of the year’s general ledger. 

Where can you keep your company’s accounting records?

The Companies Act 2006 requires all important documents and records are kept at the registered office address of the company. Companies House will automatically assume this is the case. The act does also allow for records to be kept at an accounting firm, a satellite location, or in a designated records management facility. Companies House must be notified if this is to be the case. Accounting records and company records can be kept in either paper or digital form or a mixture of both.

Whether you are a company director, self-employed, or operate a partnership, Mooncard is here to help you keep your accounts in order. Keeping control over your company’s expenditures is easy with Mooncard! The Mooncard payment system allows you to keep a digital record every time a purchase is made on behalf of your company. A digital photo of a receipt is taken at the time of purchase which is used to automatically create an expense report. This report goes right to your accounting department. Easy! If you would like to arrange a free, no-obligation online demonstration, get in touch with Mooncard today!