BOOKS & RECORDS
I obliged to keep records for tax purposes?
Yes. You must keep
full accurate records for your business from the start. You
need to do this whether you send in simple summary of your
profit/loss, prepare the accounts yourself or have an accountant
do it for you. It is important to remember that figures which
are contained in your tax returns, your accounts or summary
profits/losses, must be correct. The records you keep must
be sufficient to enable you to make a proper return of income
for tax purposes.
should bear in mind that you need to keep accounts for other
reasons other than tax, For example, your bank may want to
see them when considering an application for a loan or mortgage.
records must I keep?
The type of records
you will need to keep will depend on the nature and size of
your business. Business records can be kept on computerized
systems or manually.
records must include books of account which show
All supporting records such as invoices, bank and building society
statements, cheque stubs, receipts etc., should also be retained.All
payroll records must also be kept in the prescribed format.
- All purchases and sales of goods and services and
- All amounts received and all amounts paid out. Thses
should be recorded in a manner that will clearly show the
amounts involved and the matters to which they relate.
What information will
I need to prepare my accounts?
At the end of the accounting period you will need to have details
- Your business takings
- All items of expenditure incurred, such as purchases,
rent, lighting, heating, telephone, insurance, motor expenses,
- Any amount of money introduced into the business and
- The amount of any cash withdrawn from the business or
any cheques drawn from the business bank account, for your
personal or your family's use (these are normally referred
to as drawings)
- Amounts owed to you by customers, showing the total amount
owed by each debtor
- Amounts owed by you to suppliers, showing the total amount
owed to each creditor
- Stocks and raw materials on hand
I Claim For Pre-Trading Expenses?
A business, whether
Sole trader, Partnership or Limited Company can claim for
certain pre-trading expenses when calculating their profits.
Examples of pre-trading
- Accountancy fees
- Advertising costs
- Feasibility costs
- Costs of preparing business plans and securing finance
- Premises expenses, such as rent, from which the business
- Cost of plant and machinery required
All these costs
can be offset against the profits from the business.
should I record these transactions?
In order to keep
control of your transactions a full "double entry"
book keeping system is recommended. Any system which falls
short of this should be capable of showing the amount and
- All income
- All purchases and other outgoings
Simply keeping the
bank statements for the business is not enough - it does not
fulfill your requirements to keep proper books and records.
type of accounts will I have to submit with my tax return?
You will need to
- A Profit & loss account
Showing details of income received less cost of the goods
sold less any various other expenses of trade during the
period, the difference being the net profit/loss of the
business for the period
- A Capital account Showing
details of opening and closing capital, net profit/loss
for the period, cash introduced and drawings
- A Balance sheet setting
out details of the business assets and liabilities at the
end of the period.
A capital account
and balance sheet may not always be required, depending on
the circumstances and level of your trading activities.
my business is small can I submit a simplified form of accounts?
Yes. If your business
turnover is less than £81,000 per year simplified accounts
can be submitted showing turnover and total expenses giving
net profit/loss for the period.
long must I keep my records?
You must keep your
records for six years after the end of the accounting period.
happens if I fail to keep proper records?
Failure to keep
adequate records, or failure to keep them for the necessary
six years, is an offence and you could be heavily fined, typically
I need an Accountant?
It is not necessary to have an Accountant or Tax Adviser
in order to complete your tax returns and claim the various
allowances and relief's due to you. However, for specific
advice on book keeping and financial matters generally it
would be in your own interest to have an Accountant. The tax
office will normally correspond with your Accountant regarding
your tax affairs, if you have one.