Although there are rules requiring the retention of certain records for certain periods, and although some of those may be less than six years, we would generally recommend keeping all prime business records for a minimum of six years in order to meet the requirements for general tax and VAT purposes (unless specifically required to be kept for longer). The prime records would include book-keeping, sales and purchase invoices, bank statements, payroll records and VAT returns together with their detailed workings.

The specific legal requirements for the retention of records are:

• Accounting records for an ordinary limited company must be retained for three years (there is no legal minimum period for sole traders or partnerships and Plcs must keep accounting records for six years).

• Sickness and sick pay records, and records relating to maternity pay, paternity pay and adoption pay, must be retained for three years.

• Pay records must be kept for a minimum of three years after the end of the tax year the earnings relate to.

• VAT records and documents must be kept for six years.

• Contracts must usually be kept for six years, though contracts under seal must be kept for 12 years.

• Tax records must be kept for at least six years, as HM Revenue & Customs can raise assessments up to six years after the end of the period the assessment relates to. There is no legal time limit (in effect, it is 20 years) in cases of tax fraud.

• Where there have been any problems, such as industrial injuries, health and safety records should be kept for at least 12 years, as claims for personal liability can be lodged up to 12 years after the event.

• Records relating to some hazardous substances, for example, asbestos, may need to be kept for up to 40 years. The requirement to retain your compulsory employers’ liability insurance certificates for 40 years ended on 1 October 2008. (employers are still required to display their certificate of insurance at each place of business - the certificate can be made available to employees electronically providing all employees can gain access to it).

Information provided by the Institute of Directors

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How long to keep business records