Why record-keeping is important
It is essential that you keep very good records of all your business transactions. This is important 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 have kept good records, not only of your fee income, but also of any work you have done on a speculative basis or at a significant discount
- you will have to keep good records of all projects including time and mileage records, details of external consultants engaged, disbursements, expenses, fees billed and received and so on
- you need to know how the business is doing at any time - well kept records will tell you
Make sure that you note down all income the practice receives, and all the money that is spent, even if it is 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 is either spent or banked.
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 at the 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.
Don't forget to build up and maintain a list of useful contacts in the construction industry and in organisations which might be the source of new commissions.