How to Ensure You Are Keeping Company and Accounting Records

 

Company Books and Accounting Records are an important matter for any company and company Director. This guide covers the following information about keeping company books and accounting records:


Why Must You Keep Company Records?
How Long Must You Keep Company Records?
What Company Records Must You Keep?
What are Statutory Books?
What Records Must You Keep for Corporation Tax?
What Records Must You Keep for VAT?
What Records Must You Keep for PAYE?
What Documents Must You Keep for Meetings and Resolutions?

Company Books and Records

Keeping Company and Accounting Records

 

 

Why Do I Need To Keep Company and Accounting Records?

 

Its the Law

Keeping Company and Accounting Records is not optional requirement of a company Director. It is a mandatory requirement under Section 386 of the Companies Act 2006.

 

Why is it in Your Interests?

The reason that it is in your interests to keep proper accounting records is it helps you demonstrate the purpose behind transactions and why you entered into them.

 

How Long Must I Keep Company and Accounting Records?

 

 

You must ensure that you are keeping company and accounting records for at least three years from when they are created for a private limited company and six years for a public limited company. This is a requirement under Section 388 of the Companies Act 2006.

Records Retention

Time for Keeping Records

 

 

What Company and Accounting Records Must You Keep?

The Company Records that you must keep are quite wide-ranging. It is very important that the records a company keeps are those that support the transactions that it entered into. Furthermore, given that there will be a tax consequence from such transactions, the records that a company must keep must explain and justify those figures and calculations that appear in its tax returns.

A company’s tax returns are presumed to be submitted on the basis of what is called Self Assessment ie. the company assesses and reports to H M Revenue and Customs on the amount of tax that it owes. If H M Revenue and Customs disagrees or if a company fails to self assesss its own tax position H M Revenue and Customs will raise assessments. You therefore must keep company and accounting records so that your compliance with tax legislation is met by ensuring that you file up to date and accurate tax returns when you are duly obligated to do so. You can only do that if you keep proper company and accounting records.

Accounting Records

You must keep both company records and accounting records. The two may be similar but accounting records are a type of company record that you must keep as a Director of a company. However, accounting records are not the only type of record that you must keep. Accounting records typically are associated with a class of record that must be kept relating to the accounting matters concerning a company and its trade and transactions.

However, in order for a company to trade it can and will typically create other types of records that are not accounting records. Such records that are not accounting records will be records for example that affect a company’s trading activities. An example of such a record is personnel records and employment contracts. These are not accounting records in the ordinary sense but they are crucial records that a company needs to keep.

In the case of Nosnehpetsj Ltd v Watersheds Capital Partners Ltd & Anor [2020] EWHC 1938 (Ch) the Court referred to my explanation as to accounting and company records that as Liquidator I needed to take control of as follows:

” … I had a duty pursuant to S.144 of the IA 1986 to take custody and control of the Company’s property, including its books, papers and records. In the circumstances, I once again requested that the Respondent deliver up his complete files created, received and maintained relating to the Company, including but not limited to those held on paper or electronically. It was my position that that the file(s) the Respondent created as agent and as officer of the Company would include inter alia working papers, ‘accounting records’ within the meaning of S.386 of the Companies Act 2006 (“CA 2006″), ‘records’ and ‘supporting documents’ within the meaning of Paragraph 21 of Schedule 18 of the Finance Act 1998, records relating to Schedule 11 Paragraph 6 of the Value Added Tax Act 1994, records relating to Regulation 97 of The Income Tax (Pay As You Earn) Regulations 2003, records relating to Part 13 Chapter 6 of the CA 2006 concerning resolutions and meetings of the Company, correspondence, statutory, tax and payroll.”

Company Records You Must Keep

  • ‘records’ and ‘supporting documents’ within the meaning of Paragraph 21 of Schedule 18 of the Finance Act 1998
  • records relating to Schedule 11 Paragraph 6 of the Value Added Tax Act 1994
  • records relating to Regulation 97 of The Income Tax (Pay As You Earn) Regulations 2003
  • records relating to Part 13 Chapter 6 of the CA 2006 concerning resolutions and meetings of the Company
  • correspondence, statutory, tax and payroll

 

 

 

What are Statutory Books?

 

 

You must ensure that you keep records relating to the Company’s constitution, structure and history.

Such records will include:

  • Register of Members which are details of the owners of the Company
  • Register of Directors which contains details of the Company’s Directors
  • Register of Secretaries which contains details of the Company’s Secretaries
  • Register of Debenture-Holders which contains details of the Company’s Debenture Holders
  • Register of People with Significant Control being those who have been or are in control of the Company
  • Register of Interests Disclosed being a register of interests in shares of the Company
  • Register of Company Charges which discloses details of all of the Company’s charges

Statutory Books

Stautory Books

 

 

What Company and Accounting Records Must You Keep for Corporation Tax?

The company and accounting records that you must keep for corporation tax are an extension of the accounting records that you are required to create, maintain and retain.

 

What Company Records are Required for Corporation Tax?

The simple answer is that you need to keep accounting records that enable you to justify and evidence the figures that you submit in your corporation tax returns. The legislation in Paragraph 21 of Schedule 18 of the Finance Act 1998 provides in general terms that you are required to keep all receipts and expenses that evidence the company’s activities and the matters that evidence what gave rise to those expenses and receipts.

Such records may include includes accounts, books, deeds, contracts, vouchers and receipts.

 

 

What Company and Accounting Records Must You Keep for VAT?

The company and accounting records that you must keep for VAT are an extension of the accounting records that you are required to create, maintain and retain if you need to register for VAT. You must register for VAT if your company turnover exceeds £85,000 for a 12 month period or if you know it will exceed that sum.

 

What Company Records are Required for VAT?

The simple answer is that you need to keep accounting and company records that enable you to justify and evidence the figures that you submit in your VAT returns. In addition Regulation 31 of the Value Added Tax Regulations 1995 requires a company to retain the following types of records:

  • the VAT account
  • VAT invoices for all purchases and sales
  • credit notes
  • debit notes
  • all documents relating to imports and exports

 

 

What Company and Accounting Records Must You Keep for PAYE?

The company and accounting records that you must keep for PAYE are an extension of the accounting records that you are required to create, maintain and retain if you employ people.

 

What Company Accounting Records are Required for PAYE?

The simple answer is that you need to keep accounting and company records that enable you to justify and evidence the figures that you submit in the returns that you make each month for PAYE purposes. In addition Regulation 97 of The Income Tax (Pay As You Earn) Regulations 2003 requires a company to retain the following types of records:

  • wage sheets
  • deduction sheets
  • payments to employees
  • tax deductions in respect of the payments to employees
  • documents and information in respect of employee benefits in kind

 

 

What Company and Accounting Records Must You Keep for Meetings and Resolutions?

The company and accounting records that you must keep for Meetings and Resolutions are those records that record the meetings of a company and the resolutions passed at those meetings of a company. This is set out in Chapter 6 of the Companies Act 2006.

 

What Company Accounting Records are Required for Meetings and Resolutions?

The simple answer is that you need to keep company records that enable you to evidence meetings and resolutions as follows for 10 years from the date of the resolution or meeting:

  • resolutions passed
  • minutes of the meetings

 

What Company Records Need to be Kept for Resolutions?

The Company records that need to be kept for resolutions are:

  • record of resolution passed signed by a director of a company or a company secretary
  • minutes of the meetings signed by the chairman of the meeting
  • in the case of a sole member then other than written resolutions the member must provide to a company details of their decisions when in effect taken at a general meeting of the company

What Company and Accounting Records Must You Create?

 

 

You must ensure that you keep records relating to the Company’s affairs, dealings and property.

Such records will include:

  • Record or ledger of all monies received and payments made commonly known as a Cashbook
  • Record or ledger of sales invoices commonly known as a sales day book
  • Record or ledger of purchase invoices commonly known as a purchases day book
  • Record or ledger of all customer balances listing outstanding invoices and receipts received commonly referred to as a sales ledger
  • Record or ledger of all supplier balances listing outstanding invoices and payments made commonly referred to as a purchase ledger
  • Other records or ledgers are required depending upon the nature of a company’s dealings

Record to be Kept

Company records you must keep

 

 

Disclaimer: This page “Company and Accounting Records” is not legal advice and not to be treated as such. No liability is accepted for any reliance placed upon the same. It is provided for information purposes only.