The purpose of a document retention policy is to establish how a company should keep and maintain its documents such as financial records and insurance documents.
In this guide, we will advise you on how long you should be keeping personal and business financial records. It will also explain the process of drafting a document retention policy for your business.
The amount of time you need to keep personal financial records varies depending on the type of record:
HMRC may charge a penalty of up to £3,000 per tax year for failure to keep records or for keeping inadequate records. If you don’t have a lot of space to keep your business’ financial files, they can be stored digitally.
The types of records that you should retain depend on your type of business. Sole traders and limited companies are expected to keep different kinds of documentation for different periods of time.
Sole traders should keep all sales documentation, business expense records, and VAT and PAYE information for five years after the end of the relevant tax year. If you are subject to an HMRC investigation, you’ll need to retain these documents until HMRC advises you otherwise. Sole traders that have received a government grant must keep these documents for four years from the date of accepting the grant.
Limited companies , on the other hand, have a lot more documentation to consider. As well as the documents listed above, directors need to retain records such as loans secured against the company’s assets, shareholder transactions, liabilities, and business assets. Limited company records must be kept for a minimum of six years. Some documentation, however, will need to be retained for 10 years – this includes VAT MOSS records, minutes of meetings (detailing any resolutions), and the companies’ statutory books.
Different types of insurance policy will necessitate different approaches to document retention:
A good document retention policy (DRP) should provide the structure for a company’s information management program. It should also give some direction on how employees should manage any information created or used within the company and how long a record should be kept before it is destroyed.
For a document retention policy to be effective, your company should have a comprehensive understanding of all the records that it stores in different formats, such as paper documents, electronic files, telephone call records, and social media. Guidelines on how to handle all of this information should be included in the DRP.
A DRP should include a records retention schedule. This is a simple way to instruct employees on how long they must keep company records. Typically, a records retention schedule consists of a series of charts that list the categories of records and the length of time that records should be retained.
Company records are owned by the business and it is vital that every organisation has efficient record management to avoid the penalties mentioned above. It is also important to review the DRP once a year to maintain its accuracy and to republish it as needed. The changes should be highlighted to employees to show how they will affect their daily tasks.
If you would like any more information or professional advice about the retention of financial records, please get in contact with us here and we will be happy to help.
