Study Zone

A matter of record

HMRC’s Brian Redford highlights the need for good record keeping

Keeping good records might not be the most exciting aspect of running a business but when it comes to growing a successful venture, it is one of the most important. Good record keeping is also a major issue for HM Revenue & Customs (HMRC). Failure to take reasonable care and basic errors cost the Exchequer over £6bn a year with poor record keeping a major cause.
We want businesses to realise the benefits to their business of taking better care of their records and paperwork such as improved cash flow. This was the reason behind our recent sponsorship of The Business Inspector. The four-part series saw Hilary Devey, chief executive and chairman of a palletized freight distribution business The Pall-Ex Group, go into struggling businesses and reveal how keeping good records, managing cash-flow and developing a marketing strategy, could help turn around their fortunes. The series aired on Five in March and April.
Good record-keeping makes sound commercial sense as it gives owners the information they need to manage and grow their businesses. In addition, it makes filling in tax returns easier and quicker and helps businesses avoid paying too much tax.
So what are HMRC’ s top tips for keeping good records?
• Set up a reliable system for keeping full and accurate records of income and expenses from the outset.
• Update records regularly, rather than letting the paperwork pile up.
• Keep records for a minimum of six years.
• Keep records to show what has been bought or sold relating to your business. This should include invoices and receipts as well as details of all cash transactions.
• If you are an employer you must keep records of wages paid and details of tax and National Insurance that you have deducted and paid to HMRC.
• Keep bank statements and building society books – this is particularly important if you don’t have a separate business account. You should be able to show clearly what you have spent personally and on the business.
• For more help with record keeping, go to www.hmrc.gov.uk/startingup/keeprecs.htm. To watch a short online video on record keeping visit www.businesslink/gov.uk/taxhelp

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