Accountancy practices have to keep a variety of records to carry out their day-to-day tasks and meet their legal obligations. The length of time UK-based practices can keep a client’s records varies depending on the type of business they’re dealing with and the kind of records they’re keeping. We’ve put together this useful guide to provide you with an overview of HMRC’s record retention requirements so that you and your practice can remain compliant.
Record keeping for limited company clients
HMRC requires accountants to retain a number of accounting records in relation to limited company clients. Practices should keep records detailing:
- all money received and spent by the company, including grants
- details of assets owned by the company
- debts the company owes or is owed
- stock the company owns at the end of the financial year
- all goods bought and sold, including who they were bought and sold to
HMRC generally requires that accounting records are held for six years from the end of the last company financial year they relate to. There are some exceptions to this rule when you may consider keeping records for longer than six years, including:
- if the records show transactions that cover more than one of the company’s accounting periods
- if the company has purchased an asset that is expected to last more than six years
- if the company’s tax return has been filed late
- if HMRC is in the process of carrying out a compliance check on your client
Record keeping for sole trader clients
For clients who are sole traders, accountants need to keep records that include details of:
- all sales and income including invoices and bank slips
- all business expenses
- VAT records (if applicable)
- PAYE records (if applicable)
- personal income
- grants, including the Self-Employed Income Support Scheme (SEISS)
If your client is still using traditional accounting methods, you may also have to retain additional records, such as:
- the value of your client’s stock at the end of the accounting period
- debts that your client owes or is owed
- money that your client has invested in their business
For sole trader clients, HMRC requires accountants to hold financial records for a minimum of five years following the 31st of January submission deadline for the relevant tax year. In instances where your client’s tax return is filed more than four years after the deadline, the records should then be retained for 15 months after the date of submission.
Record keeping and money laundering regulations
In addition to HMRC’s record retention policies outlined above, The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 require that accountants keep certain client records for a set period of time, regardless of the client’s business type.
The regulations state that records, including evidence of the client’s identity and details relating to the business relationship, are retained by the accountant for five years following the end of the working relationship.