Keeping company Tax records?

We must point out firstly that we, at iBOSS, are not accountants. Nevertheless we reproduce below information from TaxAssist Accountants that we think may be useful to SME owners/managers. It provides information on time-scales for keeping company tax records.

The implementation of digital software such as QuickBooks, Sage & Xero is helping to remove the requirement to keep company tax records . The implementation of MTD by the Government has also helped in this regard. Many SMEs, however, still have a lot of the paperwork used to support their accounts and tax. 

The question is – How long does the business need to keep this paperwork for?

In general terms, the answers are as follows:

Self-employed/partner in a partnership? 

Your tax records must be kept for at least five years after the 31st January self-assessment submission deadline. So, after 31st January 2024 you could dispose of your tax records up to the 2017/18 tax year).  

The records that you should keep for this time include business bank statements, sales and purchase invoices. Also all other documents supporting your accounts and tax records, such as petty cash records. If HMRC checks your tax return they may ask to see the documents. 

Beware, however -If you submitted your tax return late then the requirement to keep records may be longer. 

If the business is VAT registered? 

If your business is VAT registered, you’ll need to keep all VAT records for at least six years. 

Limited company? 

If your business is a Limited Company, you should keep all the tax and accounting records for six years from the end of the accounting period. If your year end is 31st March, from 1st April 2024 you can dispose of records for the 31st March 2018 year. 

Are you an Employer? 

If you’re an employer, you should keep PAYE records for three years from the end of the tax year. 

Paper or digital records? 

If your records are digital, there is no need to print and file these. Simply just keep the digital records safe and backed up. 

If you received the documents physically, then you can keep the records physically. Alternatively you can scan them in and record them with your other digital records. 

If you are uploading documents into your bookkeeping software, or storing them digitally, then you don’t need to keep the records elsewhere. You can dispose of the paperwork. 

Should I keep some records indefinitely? 

Some other records you may want to hang on to for longer. For example, if you’ve purchased a property, it’s important you keep the paperwork. This is in case you need to refer to it when you come to sell the property. Other paperwork relating to the purchase of assets may be needed for a capital gains tax calculation for example. 

It’s recommended that you keep a P60 for at least four years. Payslips, however, can be thrown away two years after the end of the tax year. 

Lost, missing or unreadable records? 

HMRC can charge you a penalty if your records are not accurate, complete or readable. 

If you are missing documents, then try to get replacement documents. Suppliers should be able to issue duplicate invoices. Banks can send copies of statements on request. While your employer or pension provider may not be able to provide you with a replacement P60, they can issue you with a statement of earnings. 

For more information on tax-related matters, follow this link to the TaxAssist web site.

Excessive taxation on UK high earners could backfire on the economy.

According to The Wealth Club (a retail investment firm) the UK’s top 100,000 taxpayers paid some 24% of all income and capital gains tax in 2021/22. Their average bill was in the region of £559,000. This is up 18% compared with the previous year. The top 100 earners paid an average £46m each. This is up by 14%. According to the Wealth Club income and capital gains tax on the top 100,000 has risen by 45% over the past 5 years.

Interestingly, this is supported by a recent report by PwC. They state that the UK’s largest listed firms saw their overall tax contribution increase to £89.8bn in the last financial year. This is the equivalent to 10% of total government receipts. Their analysis showed that the direct taxes borne by these companies rose by 9.9% to £29.bn. The main contributors to this increase included higher employment taxes and the energy profits levy. Despite this, capital investment from the top 100 firms remained above £25bn. The 100 Group, which employed 1.8m people, paid an average of just over £40,000 per annum to each employee.

The concentration of tax contributions from both top businesses and individuals makes the UK vulnerable to the departure of high-value taxpayers. This is the view of many senior executives.

iBOSS Comment:

The general consensus appears to be that Ministers should work towards creating a simpler and more competitive tax regime. This should be designed to prevent an exodus of big contributors. Simply increasing tax rates is not the solution. Increasing the turnover of UK businesses through incentivisation, which in itself will generate increased tax, is a much better way of growing our economy. Also persuading more UK-based pension schemes to invest in UK businesses rather than overseas ones, would be another positive move!
To learn more about the support and advice the iBOSS Team can provide follow this link. If business finance is what you need then follow this link to our Associate company Business Finance Services .

Successful hive out of a specialist division from a large Law Firm

The team at iBoss have increasingly become involved in projects that extend beyond their planning and advisory services. One recent example of this arose when we were approached by a Partner in charge of a specialist division within a prominent Law Firm. His employers offered him the opportunity to hive out his division, which was achieving annual billings of circa £4m, as it was decided that the service offering was one that the Law Firm, for strategic reasons, wanted to exit.

The Partner was keen to explore the opportunity but first wanted to ensure that this was a viable business opportunity. He also wanted to understand what terms could be agreed and what funding would be required for the new proposed Legal Firm. In order to be able to do this he engaged iBoss to prepare a Business Plan and Financial Forecasts. Once prepared, he discussed with two of the directors of iBoss how best to negotiate and structure a deal that would be acceptable to both parties. Fortunately with a willing buyer and willing seller the focus on the deal was not purely based on financial considerations but how a smooth transition of live client cases could be handled.

Once the Heads of Terms had been agreed the biggest challenge the Partner faced was how to set up the new business at the same time as he continued to run the existing division. In this respect the iBoss directors experience was such that they were able to become actively involved in setting up the new business, whilst the Partner continued his commitments to his existing firm.

Setting up a new solicitor’s practice has many challenges, not least of which is obtaining an offer of Professional Indemnity Insurance [PII], which is a pre-requirement, of applying for Solicitors Regulatory Authority [SRA] and SRA approval, which in turn is a pre-requirement of opening a bank account for a new solicitors practice. Both parties were keen to conclude a deal as quickly as possible, whilst the ‘regulatory’ matters were being dealt with and a plan was agreed to start the process of putting in the new place the infrastructure that would be required to ensure a smooth transition of clients cases.

Whilst one iBoss director focused on the ‘PII, SRA and funding requirements, the other iBoss director project managed the move to new office premises, IT software and hardware requirements, existing employee transfers, new staff recruitment and contractual requirements etc.

Consequently, once the PII, SRA approval and bank account where opened a successful completion of the ‘hive out’ was achieved very shortly afterwards. The practice was able now to ensure that no client was impacted by the agreement and a smooth transition was achieved to the delight of the both exiting Partner and the Law Firm.

This was an unusual project in so far as it required a number of component parts being put together but not necessarily in what would be regarded as the normal order. The focus was to make the opportunity work for the exiting Partner who was very excited about running his own business and he was very pleased with the outcome.

If you have a project whether straightforward or one that may require a more ‘out of the box’ approach, then the team at iBoss would be happy to have an initial discussion on a no fee/no obligation basis.

For more details of this project, contact Phil Jones on 07876 503830 or e-mail him at phil@theiboss.co.uk . For information on the full range of services that we offer visit our web site at www.theiboss.co.uk or give us a call on 0800 093 5240.

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