All financial information, and records needed to support your annual accounts and company tax returns must be retained for 6 years from the end of the company’s financial year they relate to.
However, you will need to keep records longer than 6 years, if they cover more than one accounting period, they relate to assets purchased which are expected to last more than 6 years, or your corporation tax return was submitted late.
Accounting records include:
- Details of all income and expenditure.
- Details of assets owned by the business
- Details of all debtors and creditors
- Stockholdings at the balance sheet date
- Bank and petty cash balances and transactions
- Details of mileage claims
- Hire purchase or leasing agreements
HMRC can issue penalties of up to £3,000 for each failure to keep adequate records in respect of a tax return.
How can Xero help?
You can attach files to sales invoices raised directly in Xero, so that all relevant supporting information can be kept in one place. This can be particularly handy when chasing an outstanding debt. To do this, click on the files drop down box at the bottom of the invoice, click on ‘upload files’ and select your file to attach.
Xero includes the facility to upload supporting bills, expense claims, and receipts to all bills by selecting the blank page icon in the top right of the bill page. Using this function either directly in Xero, or via Dext Prepare is critical to ensuring you retain records to support the corporation tax and VAT returns.
This upload facility is also available for spend money transactions on the bank reconciliation page. Select ‘create’, and ‘add details’, both shown in blue below, and then click on the blank page icon and select the file to upload.
Xero also has a library section in the organisation menu called ‘files’, where additional documents which do not relate to one specific transaction can be uploaded. The files section of Xero can be organised into separate folders, by type or financial year, for example, and is accessible for each Xero user to access. Xero files can therefore provide a single source for all important business documents, such as insurance policies or lease agreements, which can then be easily and quickly accessed when needed.
As all users of Xero have access to the files section and can download the documents, this is also a very useful way of sharing information with your accountant, rather than emailing documents.
An example of the files section with various folders set up is shown below:
If you need help with this, or with other advice, then please get in touch with our accounting team.