As a dental practice owner, you must be scrupulous in your approach to financial record keeping. For one, HMRC could fine you up to £3,000 if you do not comply with its terms and cannot present the right information when asked. Also, you can be denied a tax deduction if you cannot provide proper evidence to support amounts claimed. In the worse case scenario, you could even be disqualified from trading.
Keeping accurate and organised records is good business sense. It makes it easier to prepare for year-end, to monitor cash flow and ensure tax compliance. Records should be kept for all money spent by the company, as well as received. Clear details should be available on assets, debts, and goods and services bought and sold. This list is not exhaustive: all other relevant documents must also be filed.
But for how long do you need to keep them? As an absolute minimum, a company’s financial records should be kept for six years, from the end of the financial year that they relate to. HMRC states that you should keep them for longer if: the transaction covers more than one of the company’s accounting periods; you bought something expected to last longer than six years (such as expensive equipment); you sent your tax return in late or HMRC started a compliance check.
In order to save space, apps and online packages can help, and electronic (scanned) copies of documents are absolutely fine (it isn’t necessary to keep originals), but make sure these are saved in a safe place and are backed up to the cloud and/or a physical hard drive or memory stick. Be smart about what you keep after six years to avoid a mountain of paperwork – just information that proves, unequivocally, a transaction that took place and on what terms is enough. Business and personal finance records should be separate, too and enlist the services of a specialist dental accountant to keep you fully tax compliant.
For dental practice owners, managing paperwork pertaining to both personal and business interests can be overwhelming and a burden on your time. But keeping consistently accurate records for the required period is fundamental for the long-term success of your practice as well as being a legal requirement. Most of us will admit that we could do better at record keeping; get to grips with it now and you’ll save yourself a world of stress in the future.
Michael is a specialist Dental Accountant and Tax Advisor with strong technical and communication skills.
Completing his training with international accounting firm Deloitte he then became a founding Partner at
Lansdell & Rose.