Every business must keep business records.
HMRC may wish to inspect your business records to ensure that the business is paying sufficient tax, staff are being paid appropriate wages and National Insurance contributions are being properly made. They will also want to check that the business is not being used for money laundering purposes.
The key requirement of an accounting system is permanence. You should not make business records in a form where they can be erased or changed.
All accounting and bookkeeping rules are based around a systemic requirement to:
If the business can be shown to be making a profit within that accounting period, then it may have to pay tax on the accumulated profit earned.
Following a change in the law, most UK start-up businesses will not need to be audited because they are now exempt under the Companies and Limited Liability Partnerships (Accounts and Audit Exemptions and Change of Accounting Framework) Regulations 2012 (SI 2012 No. 2301).The regulations came into force on 1 October 2012, for accounting years ending on or after that date.
However, these regulations do not remove the requirement for the keeping of business records in permanent form within a proper and organised accounting system for a period of years and you will still need to do this.
You can find out more information about auditing, accounting and reporting requirements on GOV.UK.
Every financial year, a company must file a set of accounts at Companies House (even if it does not trade). If the company is trading, it must file statutory accounts. Statutory accounts usually relate to the 12 month period up to the company’s last accounting reference date and include, amongst other things, a profit and loss account and a balance sheet signed by a director on behalf of the board. If any tax is due, it must send a tax return to HMRC and pay Corporation Tax. For more information, read Annual accounts.