Why record-keeping is important
In a business like a salvage yard, things can be quite chaotic - it's sometimes hard to keep track of what you've got. But it's essential to keep very good records of all your business transactions for several reasons:
- HM Revenue & Customs (HMRC) requires you to keep certain records for inspection for six years and may check your records from time to time as part of their compliance procedures. There is an HMRC guide to business record keeping for the self-employed on the Gov.uk website. The guide explains which records you have to keep, how long you have to keep them, and what to do if they get lost or destroyed
- if HMRC decides to investigate the business it will be of real assistance to your accountant if you've kept good records, not only of your sales, but also of things like high value breakages, items you buy that turn out to be fake or stolen and so on
- you need to know how the business is doing - well kept records will tell you this at any time
- you need to manage your business. For example, account customers need to be sent invoices and reminders if any amounts become overdue
- e-commerce operations require good record keeping to make sure that things are not sent until paid for, and that they're sent out on time to the right people
- it's important to be able to tell customers what you've got in stock when they ask
- would-be buyers - and sometimes even the police - may want to see records like bills of sale proving that you are the legitimate owner of an item of stock
Make sure that you note down all income the business receives, and all the money that is spent, even if it's only small amounts. You should be able to show from your records how all income received by the business can be traced through until it's either spent or banked. Ask yourself if you would be satisfied that the records would reveal any dishonesty if they were written up by an employee.
Your accountant will be able to give you advice on how best to keep records. You might decide to go for a computerised system, which will help your accountant to draw up your accounts at the end of the year. Don't forget that under HMRC's Making Tax Digital (MTD) initiative you'll need to keep your VAT records digitally if your taxable turnover is above the VAT registration threshold. You can find out more about MTD on the Gov.uk website.
Record keeping and licensed second-hand dealers
In many parts of the UK second-hand dealers - including those which sell goods like architectural salvage - are licensed and regulated by their local authority. Under these provisions, second-hand dealers are generally required to keep certain detailed records of goods bought and sold, including any goods sold on behalf of others. Records must generally include the following information:
- transaction date
- a description of the item/s
- name and address of the seller
- name and address of the buyer (if the value of the sale is over a certain amount)
The records must be kept at the premises or made available at other place/s of trading (such as market stalls). They must generally be retained for at least two years and made available for inspection by the police or trading standards officers on request. Contact your local authority to find out about any licensing and record keeping requirement for second-hand goods dealers in your area.