This guide will help ensure that if HMRC comes to audit your business, the process will be as straightforward as possible.
You will find out more about:
- what business records you should keep, by law
- how you should keep them
- how to make the auditing process straightforward
- how GDPR affects the way in which you archive customer and employee personal data
- how to ensure you are archiving your business records securely
What records am I legally obliged to archive?
You should keep business accounts and records for at least:
- five years for self-employed individuals, sole traders or partners in a business
- six years for limited businesses
Although this isn’t a legal requirement, not keeping accurate, up-to-date records will make tax returns difficult and time-consuming to complete. If HMRC asks to see your records and you can’t show them, this could prolong the auditing process.
How long do I need to keep business documents for?
It depends on the kind of business you operate.
Type of business
Type of record
How long you must keep records for
Business and financial
Business and financial
VAT-registered (self-employed or limited company)
Business and financial, including all VAT records
Businesses involved in import and export of goods
Stock records after they have been removed from the Free Zone or customs warehousing arrangements
All traded goods you declare to HMRC
Commercial documents from your transactions related to international trade reliefs
Businesses dealing with excise goods
Business and financial
If your company was to be investigated for criminal activity, then records from the previous 10 years could be used as evidence.
If you have a lot of records to archive and are short on space in your office, you could consider archiving your records digitally or storing your records on an off-site facility.
Do I have to archive records in a particular way?
Legally, business records don’t have to be archived in a particular way. However, it’s best practice to archive them so they are securely stored but can be accessed quickly and securely when needed.
Keeping records correctly means that if your business is audited, HMRC can easily find the information they need, even if they have to access this information from archived documents.
For this to happen, your archives should be:
- easy to understand
- easy to access for updating and inspection
- regularly updated
- set up to include an audit trail that records any amendments to the documents
Do I need to keep documents in their original format?
Legal documents and contracts have to be kept in their original format. However, you can scan them and store them digitally as well so you have an electronic back-up.
What can I do to make the auditing process as easy as possible for HMRC?
Having well-organised, up-to-date records will not only help your business run smoothly, it will ensure an HMRC audit is straightforward.
If HMRC is auditing your business, putting the following guidelines in place will help make the process as painless as possible:
- Have a facility to download data for any off-site checks or audit work that HMRC officers might need to carry out
- Maintain proper back-up and disaster recovery systems
- Include the computer system in your annual audit
- Give HMRC advance notice of any proposed changes to your records management operating system
Archiving your business records with a records management company will mean the first three points above are already taken care of.
Russell Richardson offers a complete document management and archiving service with barcode tracking and a bespoke online portal for accessing and tracking your documents. We quickly retrieve and deliver documents in person or can scan and send them digitally via our on-demand scanning service. To find out more, please give the team a call on 0800 294 6552 or contact us here.
What happens if my company fails an HMRC audit?
If your company is recognised for repeated poor record-keeping or found to be committing fraud, you may be fined or have your goods seized until you pay:
- a penalty fee
- the full amount of VAT or duty you owe
If HMRC suspects your company of wrongdoing, it could secretly monitor your business for up to a year before or after investigating you.
How does GDPR affect how I archive my customers’ or employees’ personal data?
If your business stores or processes personal data, the introduction of the new GDPR law means there are limitations to how long you can keep that data. According to GDPR, you should not keep personal data “for longer than is necessary for the purposes for which it is being processed”.
Although this sounds vague, it basically means that you shouldn’t keep any personal information for longer than needed. So in many cases, this data won’t reach the archiving stage.
You are allowed to keep personal data for longer if you are using it for the following reasons:
- Public interest archiving
- Scientific or historical research
- Statistical purposes
If you do have to archive personal data digitally, or at an off-site facility, choose a company that provides a secure service that guards against unauthorised processing or accidental loss.
How can I ensure I archive my business records securely?
The archiving and records management sector isn’t regulated and doesn’t need to comply with any standards. Therefore, if you choose to store your records off-site, it’s important to look for a reputable company you can trust, which has the facilities to store documents in a secure environment.
A good starting point is to see whether the company has any relevant ISO certificates. ISO certification demonstrates that the company uses one of the recognised ISO management systems. You can find out more about ISO certificates here.
The ISO 27001 certificate is a best-practice benchmark for information security. If a records management and archiving company holds one of these, it’s a good initial indicator that they are reputable. You can find out more information about how to pick a trustworthy archiving service here.
Russell Richardson offers a highly secure and easy-to-use archiving and document service. The company holds the following certifications:
- ISO 9001:2008—Quality Management Systems
- ISO 14001:2004—Environmental Management Systems
- ISO 27001:2013—Information Security Management Systems
- British Standard BS OHSAS 18001:2007—Occupational Health and Safety Management Systems
Our guide to why document archiving is important will give you all the information you need on the benefits of correct records management and archiving.