Record keeping

Everyone in business has to keep records. You must normally keep them for 5 years following the usual 31 January tax return filing deadline, but if you are very late sending in your returns you may need to keep them longer. A simple single entry cash book or simple computer spreadsheet or accounting system is enough for most small businesses. But it must be kept up to date. You will need to keep all the necessary paperwork to back up your cash book or computerised records. It is sensible to have a hard copy of essential information in case your computerised records are damaged or lost. This includes bills you pay and copies of the bills you send to customers.

Record keeping is an essential part of being in business. If records are poor, it will be very difficult to challenge any claims made by HM Revenue and Customs during a tax enquiry that you have not included all your income or have made deductions for non-business expenses.  Accurate records also make it much easier to actually fill out your tax return correctly and quickly.

If you are VAT-registered, there are more detailed requirements for record keeping. It would be wise to take advice in these circumstances.

HM Revenue and Customs has guidance on record keeping on its website at http://www.hmrc.gov.uk/sa/rec-keep-self-emp.htm