As a director of a private limited company, you are legally responsible for maintaining proper business records, even if your company is not VAT registered. Under the Companies Act 2006 and HMRC guidance, you must ensure accurate and complete records are kept and accessible.
In this guide, we explain which records you must keep, how they should be stored, for how long, and what could happen if you fail to comply.
Why Is Record-Keeping So Important?
Good record-keeping is essential for legal and tax compliance. It ensures:
- Accurate accounts and tax returns
- Smooth submissions to Companies House and HMRC
- Protection in the event of a tax enquiry or investigation
Only HMRC can ask you questions about your company’s financial records, unless there is criminal activity, such as fraudulent trading, in which case law enforcement may also get involved.
What Records Should You Keep?
All limited companies, even if not VAT registered, must keep the following:
1. Business Bank Statements
Maintain full statements for all business accounts in chronological order.
2. Sales Invoices
Keep a copy of all sales invoices issued to customers. These support your declared income.
3. Receipts and Purchase Invoices
Retain all documents related to expenses and purchases to justify your business costs.
4. Loan and Finance Agreements
Store any loan agreements, finance schedules, or hire purchase arrangements securely.
5. Company Records
These include:
- Statutory registers (directors, shareholders, PSC register)
- Confirmation statements
- Board meeting minutes
- Share certificates
- Accounting records (journals, ledgers, trial balances)
How Should Records Be Kept?
You can keep records in digital or hard copy format, as long as they are complete, readable, and accessible.
Digital records may include:
- Cloud-based accounting software (e.g. FreeAgent, QuickBooks, Xero)
- Scanned receipts and PDFs of documents
- Secure cloud or encrypted drive backups
Hard copies should be filed by year and document type in a secure, organised system.
How Long Should You Keep Business Records?
HMRC requires companies to retain records for at least 6 years from the end of the financial year they relate to.
You may need to keep them longer if:
- They cover more than one accounting period
- You buy/sell assets (capital gains)
- An HMRC investigation is ongoing
Benefits of Keeping Good Records
- Easier tax returns and accounts preparation
- Peace of mind during an HMRC enquiry
- Better business decisions with clear financial data
- Improved access to finance, as lenders often request detailed records
Risks of Poor Record-Keeping
- Missed tax reliefs or expense claims
- Fines for late or inaccurate submissions
- Difficulty managing cash flow or business planning
- Risk of penalties or investigation by HMRC
Penalties for Not Keeping Proper Records
Failing to keep adequate records can lead to:
- Fines of up to £3,000 per year from HMRC
- Additional penalties for inaccurate tax returns
- Interest and surcharges on late payments
- In severe cases, potential criminal charges
Even if your limited company is not VAT registered, you must still comply with the Companies Act and HMRC record-keeping requirements. Good records support your business’s success and protect you from costly penalties.
At Taxwise Accountancy, we support directors with simple, compliant bookkeeping and digital record systems tailored for small companies. Contact us today to find out how we can help you stay organised and compliant.
