What Records Must a UK Limited Company Keep?

Maintaining an accurate and up-to-date record of your company's operations is not only a decision but a statutory requirement that must be met.

Business owners, directors, and secretaries must know the legal requirements for record keeping. Directors have the responsibility of ensuring all company records are up to date and updated on Companies House register.

Which documents are required to be maintained by a limited company? This comprehensive guide will outline vital business documents that should be maintained by limited companies as well as the consequences of failing to keep them and tips for managing company data efficiently.

What records must a limited company maintain?

Records to be made include:

Company details

• Certificate of Incorporation
• Executive details such as directors, shareholders, and secretaries
• Votes and resolutions by shareholders
• Information on all loans (debentures) and indemnities
• Purchases on shares and loans secured against company assets

People with Significant Control (PSC) details

The record should include individuals who:

• Hold over 25% of shares or voting rights.
• Can appoint or remove directors.
• Control or influence the company.

Accounting records

Maintain comprehensive accounting records of:

• All money received and spent.
• Details of company assets.
• Debts owed by and to the company.
• Stock at year-end.
• Goods bought and sold.
• Financial documents for annual accounts and tax returns.

Employment records

Limited companies are expected to keep employment records for payroll and tax purposes, you must collect and retain records related to employee payments, deductions, tax codes, expenses, and benefits.

The company must also retain records of reports and payments they make to HM Revenue and Customs (HMRC) and employee leave and sickness absences.

Limited company directors who are employed must also maintain accurate records of all income derived from employment. This entails keeping essential documents related to your income, tax obligations, and pension plans, including your P45, P60, P11D, and P160.

Additionally, it is advisable to retain any pertinent information regarding your pension, such as the state pension and the taxes that have been deducted.

Directors are also required to keep certificates for any taxed award schemes and documentation concerning redundancy or termination payments. It is important to record any additional income or benefits received in relation to your employment, including tips, unless these are processed through the 'tronc' system, which indicates that tax has already been accounted for.

Directors need to keep track of all benefits relating to jobs and lump sums that might not have been listed on their P60 or P45 like incentive payments. According to the General Data Protection Regulation (GDPR), records of former employees during human resource management should only be preserved as long as they serve their initial purpose.

Why should I maintain accurate records for my limited company?

Legal compliance: Directors have a legal obligation to keep and update accurate records on Companies House register. The Companies Act 2006 requires companies to maintain proper accounting records, including details of financial transactions, assets, liabilities, and income and expenditure.

Tax return: Accurate records are essential for preparing annual financial statements and filing tax returns. HM Revenue and Customs (HMRC) may request these records during tax audits or investigations.

Employee records: Proper employment records are necessary for managing your workforce. These records include employee contracts, payroll information, working hours, and holiday entitlements. They help ensure compliance with employment laws and protect both employees and the company.

Financial decision-making: Accurate records provide insights into your company’s financial health. They help you make informed decisions, monitor cash flow, assess profitability, and plan for the future.

Audit and due diligence: If you seek investment or plan to sell your company, potential investors or buyers will review your records. Having well-maintained records demonstrates transparency and professionalism.

Avoid penalties: Failure to keep accurate records can result in penalties, fines, or legal consequences. It’s essential to maintain records to avoid such issues.

What are the consequences of not keeping proper records?

Penalties: Companies that don’t keep accurate records may face fines from regulatory authorities. The penalties can vary based on the severity of the breach and the company’s size.

Disqualification of directors: Directors are legally responsible for maintaining proper records.

If records are inadequate, directors could be disqualified from serving in that role for up to 15 years.

Legal challenges: Inaccurate records can lead to legal disputes with shareholders, creditors, or other parties. Proper records are essential for defending the company’s position in court.

Bad reputation: Poor record-keeping reflects negatively on a company’s professionalism and reliability. Investors, customers, and business partners may lose confidence in the company.

Tax issues: Incomplete records can result in errors on tax returns. HM Revenue & Customs (HMRC) may impose penalties for incorrect tax filings.

Difficulties in selling the business: When selling the company, potential buyers will scrutinise records. Inadequate records can deter buyers or reduce the company’s value

How can I organise my company's financial records efficiently?

Digital tools and software: Use accounting software or cloud-based tools to manage financial records. These platforms can automate tasks, track transactions, and generate reports.

Categorise transactions: Create clear categories for income, expenses, assets, and liabilities. Consistent labeling ensures easy retrieval and analysis.

Separate business and personal finances: Maintain separate bank accounts and credit cards for business and personal use. This simplifies record-keeping and avoids confusion.

Regular reconciliation: Reconcile bank statements with your records monthly. Identify discrepancies promptly and address them.

Document all transactions: Keep records of invoices, receipts, and payment confirmations. Digitise paper documents for easy storage.

Backup and security: Regularly back up your financial data. Implement security measures to protect sensitive information.

Retain records: Follow legal requirements for record retention (usually 6 years). Dispose of outdated records securely.

How long should I retain my limited company records?

The duration for retaining records is six years from the conclusion of the last financial year relevant to the company.

However, this period may be extended under certain circumstances, such as when the records pertain to transactions spanning multiple accounting periods when the company has acquired assets anticipated to have a lifespan exceeding six years, also, in cases where the Company Tax Return was submitted after the deadline or if HMRC has initiated a compliance investigation regarding the Company Tax Return.

What to do if your limited company records are lost or stolen?

If your limited company records are lost, stolen, or destroyed you must:

• Attempt to recreate them
• Notify your Corporation Tax office straight away
• Include this information in your Company Tax Return

Remember that accurate records not only fulfill legal requirements but also contribute to your business's overall success and stability.