3 Types of Business Documents to Keep for Tax Records
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With many types of business documents now being digitally produced or scrapped altogether, it’s easy to start digitizing or simply throwing away financial documents or legal documents for business purposes that we do not see as essential. However, whilst it is acceptable to keep a PDF of many documents, there are a lot out there that really do need to be kept hold of.
Company incorporation, director and shareholder certificates
These are the absolute lifeblood of any private or public limited company. In short, they tell governments and the public just who is involved in the business, where it is operating from, the nature of the business and the location and address of directors.
Furthermore, it also determines whether a company has been ‘floated’ or not. Lose these or shred them, and it will be costly to replace them, as well as harder to attract new investors or shareholders. But the often-overlooked reason for keeping hold of these is that they show who is responsible for paying corporate and personal income tax, as well as who is eligible to receive any tax-free benefits.
Receipts (both incoming and outgoing)
It’s very easy to scan a receipt in and throw the physical copy away. However, company tax records are built on verifiable, physical proof of income and expenditure. If a tax inspector or accountant calls, and physical copies do not exist, it is hard to consider financial statements truly reliable; digital copies can easily be doctored, which is why they are not considered acceptable by many countries’ tax offices. They may be small and fiddly, but they need to be archived and not destroyed. With tax often being entirely dependent on net profit, these can be the difference between hundreds of thousands of pounds in tax due.
Official correspondence from tax collection agencies
Why would we keep a letter telling us that tax is due? The simple answer is that the tax office will consider the dispatch date to be the benchmark for any penalties or legal action. Furthermore, if the tax office makes a mistake, either in tax estimations or by not following due process, it is often a small and seemingly inconsequential letter which can save the business a small fortune. An incorrect date or admission of error is all that is needed for a court case to be dropped. Date stamping and archiving these documents is essential.
How to keep your documents organized
With these considerations in mind, it is necessary to develop a rigid, reliable and user-friendly form of document management. Archiving is all well and good, but how will you know where to find it, or when the legally mandated time has passed before it can be shredded?
Document tracking can help to find a large number of documents and files, and for that reason, a mix between digital and physical archiving is possibly one of the best ways to quickly and easily view documents, yet still obtain physical copies when needed.
When a document comes in, it can be scanned and dated, uploaded to a central digital archive, and the physical copy placed in storage (in a logical, date ordered fashion of course.) That way, when the tax office call and want to see evidence of income and expenditure between a certain
date period, there is no need to trawl through several hundred pieces of paper; the digital copies can be sent with the click of a button, and physical copies forwarded on if needed.
A QR system is also excellent for document tracking in your company; if a unique QR code is printed and placed on physical documents, using a barcode scanner to read c# code from QR codes means that one simply needs to scan the code from the screen to be told exactly where to find the physical counterpart. Furthermore, with cloud storage being less expensive than ever, QR codes can also be sent to interested parties so that they can instantly view digital archives from their end.
In summary, there is no need to rely exclusively on paper as the most reliable method, but it is also foolish to go completely digital. Find a system that works for your company yet still sits inside legal and commonsense frameworks, and your relationship with the tax office will be much easier.
Patrick Watt is a content writer, writing in several areas, primarily in business growth, value creation, M&A, and finance. Other interests also include content marketing and self-development. Say hi to Patrick on Twitter @patrickwattpat
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