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The Significance of Maintaining Comprehensive Business and Accounting Records

Updated: Feb 5



In the realm of business operations, maintaining meticulous company and accounting records holds paramount importance, as failing to do so can result in substantial consequences, including fines of up to £3,000 by HMRC or disqualification as a company director.

 Company Records:

The imperative to keep records extends to various facets of the company, necessitating the documentation of directors, shareholders, and company secretaries, as well as the outcomes of shareholder votes and resolutions. Additionally, records must encompass promises for future loan repayments (‘debentures’), indemnities for company fault-related payments, transactions involving share purchases, and details of loans or mortgages secured against company assets. Companies must notify Companies House if these records are kept at an address other than the registered office.

Register of ‘People with Significant Control’ (PSC):

 A vital component of record-keeping involves maintaining a register of ‘people with significant control’ (PSC). This register must include details of individuals possessing over 25% shares or voting rights, those with the authority to appoint or remove a majority of directors, and those exerting influence or control over the company or trust. Even if there are no individuals with significant control, a record must still be maintained.

Accounting Records:

An extensive array of accounting records must be meticulously documented, including all financial transactions, details of company-owned assets, debts owed or owed to the company, stock holdings at the financial year’s end, and records of goods bought and sold. The company should also maintain other financial records, information, and calculations required for the preparation and filing of annual accounts and the Company Tax Return. These encompass records of all money spent and received, invoices, contracts, sales books, and relevant documents such as bank statements and correspondence.

 Consequences of Non-compliance:

 Failure to adhere to these record-keeping requirements may result in fines of £3,000 imposed by HMRC or disqualification as a company director.

 Record Retention Period:

 Records must be retained for a minimum of 6 years from the end of the last company financial year they pertain to. Exceptions to this timeframe include transactions spanning multiple accounting periods, purchases expected to last over 6 years, late submission of the Company Tax Return, or initiation of a compliance check by HMRC.

 Addressing Loss, Theft, or Destruction of Records:

 In the unfortunate event of records being lost, stolen, or destroyed, one must immediately take steps to recreate them to the best of their ability. Simultaneously, the Corporation Tax office should be promptly informed, and this information should be included in the subsequent Company Tax Return.

 Conclusion:

In conclusion, the maintenance of comprehensive company and accounting records is not only a legal obligation but a fundamental aspect of sound business management. Failure to meet these obligations can lead to severe penalties and repercussions for both the company and its directors.

Lucricious Accountants, Accountants & Tax advisers

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Guest
Jul 17

The team at Lucricious is professional and pays attention to detail. When you need an accountant that will serve your business, you are in the right place. Mutala Baba FCCA

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