How long do you need to retain your documents? A guide for accountants

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The Companies Act 2006 requires all businesses to maintain adequate accounting records which are sufficient to:

• Show and explain the company’s transactions;
• Disclose with reasonable accuracy, at any time, the financial position of the company at that time; and
• To enable the director to ensure that any accounts required to be prepared comply with the requirements of the Companies Act 2006.

Failure to retain accounting records in compliance with the Companies Act 2006 can carry heavy penalties and even a prison sentence.

All companies must have some form of document retention policy. The term ‘document’ can be a physical record, such as a paper invoice, or it can be an electronic file or web page. Documents, including accounting records, need not be kept indefinitely by a company because of constraints on storage facilities and the associated costs of such storage. So where, and for how long, does a company have to keep records?

Section 388 of the Companies Act 2006 says that a company’s accounting records must be kept at its registered office, or such other place as the directors see fit. Wherever the accounting records are kept, they must be open for inspection at all times by the company’s officers (i.e. the directors).

It is not uncommon for a business to have its accountancy firm’s address as its registered office, although it is unlikely that the accounting records will be held at the accountancy firm and will instead be held in the premises where the company trades. This is permissible because section 388(1)(a) does not stipulate that the accounting records must be kept at the registered office, but provides an option being ‘… such other place as the directors think fit’. In terms of the statutory retention periods, Table 1 below provides a summary of these.

Care must be taken to comply with the requirements of the Companies Act 2006 and a company must not destroy any documents or accounting records which are covered by statutory retention periods before the expiration of those retention periods. For documents that are not covered by a statutory retention period, the company’s document retention procedures should be followed.

Statutory retention periods

Steve Collings is the audit and technical partner at Leavitt Walmsley Associates Ltd.

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