As a director of a liquidated company, you might have a few questions. One of which might be, how long do you have to keep business records in the UK? In this blog, we’re going to look into this and give you some advice.
Are you still not sure what to expect when it comes to life after liquidation? Then, you should read our blog on life after a CVL, where you’ll find plenty of tips and advice on what might be next for you as a director.
There are many reasons why a business may end up closing its doors for good. A common reason for this is financial difficulties. If your business was experiencing financial difficulties and you entered a CVL, then that’s great, as it means that you adhered to your director’s duties.
Some directors fail to adhere to their duties, which leads to the company being closed by a compulsory liquidation. Not only is this more stressful, but the director also has little control over the situation and may face increased scrutiny. It’s vital that you keep hold of adequate records, and that they are linked to your company’s registered office address.
How long do I need to keep company records for?
Deciding to close a company can be tricky, and it’s important to get personalised, professional advice on which method is right for you. Here are some examples of methods you might use.
- Creditors’ voluntary liquidation (CVL)
- Members’ voluntary liquidation (MVL)
- Compulsory liquidation
- Strike off method
- Pre-pack liquidation
- Administration
Not all of these methods involve formal liquidation. For example, a company strike-off is an alternative to liquidation, while pre-pack liquidation is typically part of administration. Only licensed insolvency practitioners can handle formal liquidation procedures such as CVLs, MVLs and compulsory liquidation.
Additionally, some of these methods will not end with the company being closed down and removed from the Companies House register.
Regardless of which method you choose, you will need to retain your company’s records for a specified period of time. We’re going to be focusing on limited companies and how long they need to keep records for.
Generally, limited company records must be retained for at least six years from the end of the last financial year they relate to. However, some documents, such as VAT records and statutory books, must be kept for up to 10 years. It’s crucial that you adhere to these time frames; otherwise, you risk facing the consequences.
Which business records do I need to keep hold of?
Limited companies must keep hold of more documentation than sole traders or those who are self-employed. Here are some examples of the accounting records you will need to keep hold of.
- Sales documentation
- Business expenses
- Personal income & income tax information
- Money paid into and withdrawn from the business (bank statements from a business bank account)
- Payroll records
- VAT information
- PAYE information (National Insurance contributions)
- Details regarding company assets
- Details regarding business liabilities
- Details of loans secured against the company or its assets
- Any shareholder transactions
Are there any others that need to be considered?
There are some documents that must be retained for 10 years following the last accounting period of the closed company. These include the company’s statutory books, the minutes of board meetings and resolutions and the company’s VAT records.
Do employers need to consider anything else?
If your company employed staff, you must keep PAYE records for at least three years from the end of the tax year they relate to. Having access to this means you’ll be able to provide all information regarding tax codes, employee sickness and leave information and any other taxable income, taxable expenses and benefits for employees. All of these must be accounted for in your records.
Why do I need to keep these records?
It’s vital that you keep hold of this documentation in case your company needs to be investigated by a relevant body. For example, HMRC may begin a tax investigation. If this happens, you’ll need to provide evidence to back yourself up in the claim.
What happens if you don’t retain business records?
Failure to maintain business records can result in fines of up to £3,000 per offence. In serious cases, directors could face disqualification, especially if records are missing during a tax investigation or liquidation review.
It’s definitely not worth the risk of not keeping your records, as these consequences will be imposed if you fail to provide the correct documentation on time when it is requested.
What happens if my company’s financial records get lost or stolen?
If your company records are lost or stolen, you must report this to HMRC as soon as possible. They will likely ask that you try to recreate them, and you will also need to include this information in your company’s tax return.
With HMRC’s Making Tax Digital (MTD) initiative, keeping digital records is now highly recommended, and in some cases (such as VAT-registered businesses), it is mandatory. Digital records provide better security and ease of access in case of an investigation.
We hope this blog has been helpful and answered the question, how long should you keep accounting records in the UK? There are many financial and accounting records that you will need to keep hold of. There may also be instances where you are told to keep hold of other financial records for longer.
Do you need support with liquidation or business rescue? Contact our friendly team today, we’re more than happy to help.
Justin Barker
I’m Justin Barker, the Managing Director at 1st Business Rescue. I have over 25 years of experience providing insolvency advice to business owners.
I understand how challenging it can be when dealing with financial difficulties within your business. It’s easy to ignore the problem and hope that it disappears, but this is often the worst thing you can do. Our dedicated team is here to provide honest, valuable advice to help UK directors deal with their personal situations in the most appropriate way.
No case or circumstance is the same, but I can guarantee that I am there to give you the best advice.
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