It's 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. Details of the records you must keep to comply with the requirements of the VAT Margin Scheme are included in Notice 718 Margin scheme and global accounting
- 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 sales and purchases, but also of theft, damage and other losses. Because some items may be slow to move and may have to be discounted to near or below cost, you should keep good details of the price you paid for items and the price you sold them at
- you need to know how the business is doing at any time - well kept records will tell you
- you need to be sure that untrustworthy members of staff are not stealing from you. Be particularly careful if you are not able to supervise staff on a day-to-day basis
Depending on what you sell, you may also need to keep export records, droit de suite artist's resale rights records, anti-money laundering records, and details of certain items' background and provenance.
Make sure that you note down all income the business 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. Ask yourself if you would be satisfied that the records would reveal any dishonesty if they were written up by an employee.
If you take any goods from the business for your own personal use you should keep a record of these. Don't forget to tell your accountant about any of your own antiques that you decide to include in your business stock.
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.