Every business needs to have a good record retention policy. Failure to retain documents for the use of the Inland Revenue can result in fines of up to £3,000. Other records which have no statutory retention period may be essential in later years for historical or research purposes.
Either way, you must ensure that you manage your business documents effectively, and, above all, that you keep the right ones.
Which records should be kept?
The documents that should be kept will vary from business to business, according to size, status and in some cases, personal preference. Some items should be kept permanently, such as deeds and title papers, accounting ledgers, incorporation documents and, all of the company's statutory records. Others can be discarded after allocated periods of time. The following is not an exhaustive list, but a rundown of common records that will be relevant to the majority of businesses.
Tax records
All business records must be kept for five years from the last date by which the relevant tax return was to be filed. So, for example, a completed tax return for the year to 5 April 2000 will be returned to the Inland Revenue by 31 January 2001 and the relevant documents should be kept until 31 January 2006. But remember, this is only the minimum statutory requirement. You may wish to keep records for longer periods.
These include:
You may also wish to retain personal financial papers for a similar time.
VAT records
VAT records must be kept for six years after the current date, although in certain limited circumstances agreement can be made with Customs and Excise to retain documents for a shorter period. Relevant records include:
Accounting records
Records used to compile annual accounts normally need to be retained for five years. Annual accounts that have been audited should be kept permanently.
Wages and personnel records
Documents related to wages, such as P45, must be retained for six years. Records of income tax, pay details and payroll, as well as national insurance contributions and annual earnings summaries should also be kept for this period.
A confidential personnel file for every employee should be maintained. This will include such items as personal details, application forms and offer letters, national insurance number, payment details and holiday/sickness information. For legal and reference purposes, this file should be kept for seven years after the end of the person's employment. You might also include medical records, accident reports, expense accounts and overtime details.
Other useful records
It is often useful to keep some commercial records for reference purposes. For example, old contracts, customer orders, enquiries and other correspondence could all be useful when drawing up statistics, dealing with comparable new customers or renewing a relationship with an old client.
Press cuttings, adverts and company newsletters can all be helpful for creating a company image and branding purposes. It is up to you to decide how long these records are kept.
It is a good idea to draw up a timetable for the retention of documents for your own business. Below is a typical example:
Sample Record Retention Policy
| Permanent records | Long term (6+ years) |
Short term (up to 6 years |
| Deeds/title papers | VAT records | Other accounting records |
| Register of members | Wages records | |
| Accounting ledgers | Tax records | Company newsletters |
| Incorporation documents | NICs records | |
| Audited annual accounts | Personnel files | Press cuttings |
| Insurance records | Payroll records | Accident reports |
| Pension scheme records | Medical records | Adverts |
| Personal financial papers | Old contacts, orders etc |
If you do not already have a good record retention system, now is a good time to act. Call us to discuss this and other ways of maximising the efficiency of your business operations.