Record Keeping Tips for Small Businesses

If you run a small business, you will need to ensure your record keeping is up to par. When your record keeping is good you will have a better idea of how well your business is performing.

1. What is record keeping?
2. What records should my business keep?
3. How long should you keep bank statements?
4. How to keep digital records under Making Tax Digital

What is record keeping?

Record keeping relates to the organizing and storing of all the files, invoices, and documents that relate to your business’s activities.

What records should my business keep?

You should keep the following business records:

• Your businesses name and address
• Your VAT number
• A record of the VAT accounting schemes you use
• A record of the supplies that your business makes and receives

You will also need to keep a record of the amount of tax that your business owes on its sales along with:

• The tax your business can claim on any business purchases
• The tax your business owes and can claim on any objects or assets bought from EU countries
• The tax your business has to pay on the behalf of the suppliers who use a Reverse Charge Procedure
• The tax your business owes or is able to reclaim following an error adjustment or correction
• The tax your business owes or is able to reclaim as part of an adjustment

How long should you keep bank statements?

You must keep bank statements for six years. This is from the end of the last financial year. However, you will need to keep them for longer if the statements show an entry that covers more than one accounting period.

You will also need to keep the bank statements for longer if:

• Your company has bought equipment, for example, that is expected to last for more than six years.
• Your tax return was sent late
• HMRC has begun a compliance check and is looking at your Company Tax Return

How to keep digital records under Making Tax Digital

VAT-registered businesses with a taxable turnover of more than £85,000 will need to follow the Making Tax Digital for VAT rules. The records that businesses are required to keep are the same as any VAT-registered business. However, you will need to start keeping digital records.

You do not need to keep a record of anything that is not typically included in your VAT return or adjustments of VAT due.

To help you keep your records, you can use any digital product. In this way, you can use your current software that you use to submit your tax return, such as Billomat.

Supplies that your business makes

If your business makes supplies you need to keep a digital record of them. You will also need to keep a record of:

• The time you supplied them (When you sent the invoice)
• If you’re using a cash accounting scheme you will need to keep a record of the date that you received payment
• The value of the supply (The net value excluding VAT)
• The rate of VAT charged

You will also need to record the full amount of VAT that was charged on the supplies your business receives. You will need to record when you receive them at a:

• Standard rate
• Reduced rate
• Zero rate
• Supplies that are outside the VAT’s scope or are exempt

You can combine together the value of the supplies in one single record if they were on one invoice and they were made at exactly the same time or they are charged at the same rate of VAT.

If an invoice details supplies that are given different rates of VAT you need to record each VAT rate charged separately.

Using a third party

If you use a third party and you’re given a single invoice for multiple supplies that may on behalf of you it’s perfectly ok for you to treat those supplies as one invoice.

Using a Receipt Scanner

While HMRC does not insist that you scan your receipts it won’t do any harm to scan them. A receipt scanner can help you to keep records of your business purchases. They’re also a great way to keep hold of the information without it taking up too much room in your office. You can upload your receipts to a file and store them that way.

If you want to know how long to keep accounting records such as receipts: We have the answers. You should keep your accounting records for at least six years. This is how long you need to keep your bank statements. While some people may say you do not need to keep your receipts for this length of time it is sensible. You may need to double check your receipts or send them to HMRC if they wish to do a compliance check.

Using the above tips can help you to keep accurate records that HMRC will approve of.