Whether you’re a start-up business or a well-established company, understanding the requirements of holding company records is crucial to understand legal responsibility, compliance and operational efficiency. The legislation can be tricky to understand so in this article, we’ll explore the important question of how long you need to keep your business documents.
Why Does Business Document Retention Matter?
First of all, what do we mean by ‘business documents’? These include financial and accounting records, bank statements, company tax returns, taxable expenses, sales receipts, and more. Retaining accurate records of the business should be considered a priority.
Holding onto these documents goes beyond simply storing piles of paperwork in the cupboard. It serves the crucial purpose of safeguarding your business’s interests and company assets, ensuring smooth compliance with legal obligations.
By implementing effective document storing practices and keeping your documents organised and accessible, you’ll be in a better position to handle audits, disputes, and other business challenges efficiently.
There are also some extended reasons to why retaining business documentation matters:
Business Records: Compliance Legal and Regulations
Retaining and maintaining the necessary records, dictated by regulations, demonstrates compliance and avoids potential legal issues and penalties. This proactive approach helps protect your business’s reputation and integrity if any unforeseen event occurs.
It’s important to be aware that some industries may have different rules and regulations. It’s always recommended to conduct your own research and consult your accountant.
Supporting Business Operations
Documents serve as vital evidence for many aspects of short and long-term business operations. Whether it’s tracking financial transactions, monitoring employee records, or maintaining contracts and agreements, ensuring the relevant documents are readily available ensures a smooth operation.
Proper document containment allows you to retrieve information promptly, make informed decisions, and effectively manage day-to-day activities.
Resolving Disputes and Legal Proceedings
In the event of a legal dispute, holding accurate and comprehensive documentation can be critical. Whether it’s contract disputes, employee-related issues, or customer complaints, proper business record retention allows you to present evidence, establish facts, and support your position.
This can greatly enhance your chances of a favourable outcome, reduce potential liabilities, and minimise financial risks.
How Long Do You Legally Have to Keep Business Documents in the UK?
Now, let’s delve into the specifics of retaining business records. The duration of which you need to keep business documents (legally) depends on the type of document.
Below, we have broken down a number of common business document categories and their corresponding retention periods. Some records will differ from business-to-business; however, the below are examples of documents most businesses will deal with.
Tax Return: Generally speaking, you should keep hold of business tax records for six years. However, we recommend consulting your accountant for more information, specific to your situation.
Expense receipts: According to HMRC, you must keep your expense receipts for at least five years. Again, we recommend discussing this with your accountant.
Invoices and payment records: You must keep these for at least five years after the 31 January submission deadline of the relevant tax year.
- Payroll records: Retain payroll records for at least three years, from the end of the relevant tax year, after an employee’s contract termination.
- Employment contracts: It’s recommended to hold onto employment contracts for at least six years, as specified in the 1980 UK Limitation Act.
Legal and Compliance Documents
Contracts and agreements: Contracts and business agreements must be preserved for a minimum of six years. Additionally, you must save physical copies of your company insurance policies as well as any pertinent certificates for at least seven years after the policy has expired.
Licenses and Permits: Licenses and permits should be retained for as long as they are valid by the relevant regulatory bodies. This includes business licenses, professional certifications and permits to work within specific industries.
Please note that these are general guidelines and it’s essential you consult your accountant for information specific to your business and industry.
Storing of Company Records: Best Practices
To help maintain effective document storing practices, consider the following tips:
Create a Comprehensive Document Retention Policy
Develop a well-defined record retention policy that clearly outlines procedures, responsibilities, and retention periods for each document category. This policy should align with legal requirements, industry regulations, and the specific needs of your organisation.
Once a procedure is in place, we recommend regularly reviewing and updating the retention policy so it’s up-to date, preferably every tax year.
Train Employees on Document Handling
Employees should receive training on how to handle, store, and discard documents. This training should include how to manage sensitive information and the requirements (both legal and logical) for document sharing, storing and protection. We also recommend a refresher course at the end of the company financial year.
Storing Documents in Secure Storage
Dedicated storage companies specialise in secure and reliable document storage, offering advanced security measures, professional archiving practices, and efficient retrieval systems. This allows businesses to save time, ensure document longevity, and focus on core activities while enjoying peace of mind and increased productivity.
At GTW Storage, we provide highly secure document storage facilities.
Click here to find out more.
In conclusion, effective document retention practices are crucial for legal compliance and operational efficiency in your business. By retaining and organising your documents, you can ensure compliance with regulations, support business operations, and resolve disputes.