In this section:
Record keeping (partners and partnerships)
As a member of a business partnership, you're taxed on your share of the business profits - so you must keep accurate records. By law, you must keep business records for at least five years from the 31 January following the tax year for which the tax return is made. A penalty of up to £3,000 can be charged for each failure to maintain or retain adequate records to back up a tax return.
You should keep your business and personal records separate - it's a good idea for the partnership to have a separate bank account. It's the responsibility of all the partners to make sure the partnership keeps accurate records. Every partnership must have a nominated partner - one of their jobs is to use the business records to fill in the partnership return.
On this page:
- Basic records you must keep
- Capital allowances
- Other records you must keep
- Records related to both business and personal use
- If your records are lost or destroyed
Basic records you must keep
Your basic partnership records should include:
- a record of all the partnership's sales, with copies of any invoices you've issued
- a record of all your purchases and expenses
- invoices for all the partnership's purchases and expenses - unless they're for very small amounts
- details of any amounts partners personally pay into or take from the business
- copies of the partnership's bank statements
The nominated partner uses these records to work out:
- the partnership's business profit
- each partner's share of the profits - this goes on the supplementary partnership pages that you and your partners fill in with your individual tax returns
Monthly returns and record keeping - read further information from Business Link
Construction industry
If your partnership works in the construction industry the Construction Industry Scheme (CIS) applies to it. This means that the partnership may:
- receive income that's had tax deducted from it
- make payments from which you've got to deduct tax
Your records should show all the partnership income - including any received after tax has been deducted. The partnership must keep copies of all payment statements showing tax deducted from its income. If tax has been deducted at the higher rate, it's very important that your 'verification reference number' is shown on the payment statement so you can reclaim any overpayment of tax.
Monthly returns and record keeping for CIS - read detailed guidance
Read the guide for contractors and subcontractors in the CIS (PDF 813K)
Capital allowances
It's helpful to keep a record of purchases and sales of assets that your partnership uses, like furniture, equipment and machinery. These may be treated differently in your tax return.
You can claim capital allowances for some of these items. Instead of claiming relief for the whole of the cost when you buy them, you claim relief over several years.
Capital allowances, the basics - read more
Tax allowances and reliefs - read detailed guidance
Other records you must keep
Different businesses need different types of records. Depending on the type of business, these might include:
- cash book to show smaller transactions
- sales and purchase ledger
- wages book
- till rolls
- invoices, receipts and statements issued and received
- hire purchase and leasing details
- details of incidental or miscellaneous income - for example rent for accommodation that is surplus to your business' requirements
- details of any goods used or consumed personally by yourselves or your families
- details of items not rung through the till
- an inventory of stock on hand at the end of your accounting year
- bank and building society statements, pass books, cheque stubs and paying-in slips which include details of business transactions
- details of any private money brought into the business
- details of any money taken out of the business bank account or in cash for your own or your family's personal use
- details of any assets or services used for both business and private purposes (with evidence to support an apportionment of business/private use)
Records related to both business and personal use
You should keep business and personal records separate. If assets are used for both business and personal purposes - for example a car that's used for both business and personal travel - you must keep a record of business and personal use so the expenses can be split. Only the expenses for business use can be claimed as a deduction when working out the business profits.
Sales
Mistakes are often made when recording sales if:
- stock is taken for personal or family consumption
- goods or services are supplied to someone else in return for goods or services - barter transactions
These transactions may not be recorded through a till but you still need to keep a record of them. Note down the goods or services taken or supplied and their normal price. Your business profits must be worked out using their normal price.
Motor vehicles
You might use the same vehicle for both business and private purposes. If you do, you should keep enough details to be able to split your expenditure between business and private use. Usually it'll be enough to keep a record of business and private mileage and split the vehicle's total running costs in the same proportions.
Tax relief for the self-employed - read detailed guidance
If your records are lost or destroyed
If your business records are lost or destroyed and you can't replace them you must let us know what's happened. You'll have to try to recreate them.
Once you've gathered the replacement information use this to complete your tax return. If you don't have exact figures tell us whether the figures you have used are either:
- an estimate - a figure you want us to accept as your final figure
- a provisional figure - one you want to use until you can confirm the actual amount. You must also let us know when you will have the actual figures.
Use the 'Additional Information' section to say how you've arrived at these figures and why you can't use actual figures. If you make adjustments later and you've underpaid tax you may have to pay interest and penalties.
