Keeping records could help a small business owner manage his or her finances. However, UK law does not make record-keeping optional. It obliges a small business owner to retain records needed for the completion of annual self-assessment tax returns. A small business registered for VAT (value added tax) must also hold on to all records of VAT transactions. The UK tax authority, HM Revenue and Customs (HMRC), does not say how a small business should keep such records. None the less, HMRC offers advice about record-keeping for tax-related matters and for general business purposes.
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Use a manual system if you prefer a traditional approach to keeping small business records. Buy and set up files and ledgers such as a petty cash book, sales purchase book and a cash book. Retain all original documents. These include bank statements and receipts. Manual systems vary according to the needs of a business but an accountant can give appropriate advice. Ensure you keep all records and original documents in a secure and fireproof area.
Set up a computerised record-keeping system as an alternative to a manual system. Accounting and bookkeeping software can provide the templates you need although some small business owners use Microsoft Excel. Scan the front and back of original documents and keep these on a computer or an external storage unit such as a CD.
Take advantage of record-keeping applications for mobile devices. HMRC has approved eight such applications. They are suitable for small businesses that are not registered for VAT.
Update small business records regularly whatever system you use. Keep records for a minimum of five years. The five-year period starts from 31 January after the tax year that your tax return refers to. Retain VAT records for a minimum of six years.
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- The UK Tax System: An Introduction (2nd edition); Malcolm James; 2009
- Finance for Small Business; Emily Coltman; 2011
- HM Revenue & Customs; Keeping Records
- Business Zone; Three Record-Keeping Mistakes That Could Get You Fined and How to Avoid Them
- HM Revenue & Customs; Keeping Records: A Quick Guide
- HM Revenue & Customs; Help from HM Revenue & Customs Advice Teams
- Complete Business Start-Up; Manual Accounting Systems
- The 30 Day MBA In Business Finance; Colin Barrow; 2011
- The Good Retirement Guide (27th edition); Frances Kay (editor); 2013
- HM Revenue & Customs; Simple Record-Keeping Applications for Mobile Devices
- HM Revenue & Customs; Accounts and Records for Your VAT