A company director has been disqualified from being involved in the management of any company for eleven years due to insufficient record keeping.
The High Court issued a disqualification order lasting eleven years to the sole director. The liquidator found the director completely unco-operative when requesting the company’s statutory records.
This was reported to the Insolvency Service, which investigated and found that the company was acting as an umbrella company in part of a tax avoidance scheme.
This is obviously an extreme case, but there are wider implications for company owners. Companies are subject to strict conditions when it comes to the records that must be kept, both in respect of the company itself and its financial and accounting information. Failure to keep accounting records can lead to a £3,000 fine and/or disqualification from acting as a director.
In short, good record keeping should be a priority for any company director.
So what does sufficient record keeping look like
Company and accounting records
You must keep:
- records about the company itself
- financial and accounting records
You can hire a professional such as Chippendale and Clark to help with your tax.
HM Revenue and Customs (HMRC) may check your records to make sure you’re paying the right amount of tax.
Records about the company
You must keep details of:
- directors, shareholders and company secretaries
- the results of any shareholder votes and resolutions
- promises for the company to repay loans at a specific date in the future (‘debentures’) and who they must be paid back to
- promises the company makes for payments if something goes wrong and it’s the company’s fault (‘indemnities’)
- transactions when someone buys shares in the company
- loans or mortgages secured against the company’s assets
You must keep accounting records that include:
- all money received and spent by the company, including grants and payments from coronavirus support schemes
- details of assets owned by the company
- debts the company owes or is owed
- stock the company owns at the end of the financial year
- the stocktakings you used to work out the stock figure
- all goods bought and sold
- who you bought and sold them to and from (unless you run a retail business)
You must also keep any other financial records, information and calculations you need to prepare and file your annual accounts and Company Tax Return. This includes records of:
- all money spent by the company, for example receipts, petty cash books, orders and delivery notes
- all money received by the company, for example invoices, contracts, sales books and till rolls
- any other relevant documents, for example bank statements and correspondence
How long to keep records
You must keep records for 6 years from the end of the last company financial year they relate to, or longer if:
- they show a transaction that covers more than one of the company’s accounting periods
- the company has bought something that it expects to last more than 6 years, like equipment or machinery
- you sent your Company Tax Return late
- HMRC has started a compliance check into your Company Tax Return
If your records are lost, stolen or destroyed
If you cannot replace your records after they were lost, stolen or destroyed you must:
- do your best to recreate them
- tell your Corporation Tax office straight away
- include this information in your Company Tax Return
Chippendale and Clark use software such as Quickbooks and Xero to keep accounting records digitally, which not only assists in the preparation of VAT, accounts and Tax returns, but also provides a second storage of any invoices and receipts.
If you would like to learn more about how Chippendale and Clark can improve your record keeping, please call the Chippenham office on 01249 465 435 or Swindon office on 01793 378 586.
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