TLC says read this if you’re in business (Sole Trader, Partnership or Limited Company)

The TLC guide to record keeping 

We all know we need to keep records right (and alert – the taxman imposes penalties if we don’t). So here’s a little recap of the time limits:

If you’re in Business as Sole Trader or Partnership you must keep those dreaded receipts and invoices for 5 years after the 31 January of the relevant year e.g. 2013/2014 accounting/tax year you must keep them until after 31 January 2020.

If you’re a Limited Company its six years from the end of the last company financial year.

So how we can make the keeping or records less painful?

 Well TLC loves… saving time and trees

Unless you’ve cracked the way to turn an average day from 24 hours to 30 (and if you have, fancy sharing?), you’re probably as short on time as we are. Saving time is therefore not only welcome, but necessary. But then so is staying on the right side of HMRC.

Here are a few ways you can save a little time (and trees) while still making sure you’re compliant.  If you aren’t certain whether you should do something differently, just give one of us a call and we can clarify what the position is for you and your business.

Digital documents for the taxman – a few simple rules…..

Sales invoices

• You can create electronic invoices, but they need to be compliant with both UK and EU guidelines.  Virtually all electronic invoice software designed for the UK market complies with these rules, so unless you’re going to create your own e-invoices you won’t need to worry about studying the latest advice from HMRC.
• When considering e-invoicing software look for one that will transfer the invoice data directly to your bookkeeping records – most will (see The Next Step).  This is a great timesaver and the cost of the software isn’t significant.   In fact, basic systems can be obtained for free.  Give James a call if you want to chat through options as he’s familiar with most kinds of software for this purpose.  In fact TLC are Xero accredited and love the Cloud.

Purchase invoices

• You’re allowed to scan the original documents and then dispose of them if you prefer to keep digital copies.   HMRC will allow it for VAT and other records, e.g. PAYE and corporation tax.  But the scanned version must be faithful to the original.  For example, you mustn’t use optical character recognition to convert invoices etc. into text files.
• Software and online services can speed up the process of converting and storing your purchase invoices, employee expenses etc. However there is less choice than for sales e-invoicing.  The cost generally depends on the level of service you want and how many transactions are involved. You might need to phone around to obtain the best price.

Watch out for…

Making it too complicated.  HMRC requires that businesses must organise records in such a way that they can be readily identified and linked with the transaction to which they relate.  So if you’re considering DIY scanning, make sure you have a referencing system and, naturally, keep back-up copies of your data.

The exceptions

For the time being there are two types of document that HMRC insists must be kept in paper form: dividend vouchers and bank interest certificates.  Of course, you can scan and store them digitally with your other records, but you must also retain the paper version in case HMRC pays a visit to inspect your records.

Need to know more?

We’re always at the end of the phone for a chat about your particular circumstances, but if you want to do a bit more research you can find some detailed information here about record keeping generally and here for more about cloud solutions

TLC says think of the trees!