The contractor's record-keeping system: what survives an HMRC check


Contractors face two kinds of HMRC scrutiny: the IR35 status enquiry, and the routine check of the company accounts. Both are survived the same way: with records that are complete, contemporaneous and organised. Here is the system.


Contracts and status evidence first


For IR35, the contract is the starting point but never the whole story. Keep every version of every contract, the working practices evidence that backs up your status determination (who controls the work, substitution clauses exercised or available, financial risk taken), and any CEST outputs or professional status reviews. HMRC looks at reality, not paperwork, so evidence of how you actually worked matters more than what the contract says.


The company books, kept properly


Bank feeds reconciled monthly. Every expense with a receipt, photographed at the time, not reconstructed in January. Dividend vouchers and board minutes for every dividend. Payroll records including P60s. A contractor's company is small, which means every transaction is visible; there is nowhere for sloppiness to hide.


Separate everything


One business bank account, used only for the business. No personal spending through the company, no business spending through the personal account. Mixed accounts are the single biggest source of pain in enquiries, because every personal transaction becomes something to explain.


The six-year rule


Keep everything for six years from the end of the accounting period. Digital storage is fine; HMRC accepts electronic records. What it does not accept is "the laptop died" as a filing system. Cloud accounting with attached source documents is the standard for a reason.


Get the routine outsourced if needed


Many contractors would rather do billable work than bookkeeping. Outsourced accounting for contractors, like the contractor support services at Finex Outsourcing, keeps the records, the payroll, the dividends and the tax filings straight, so an HMRC check is an inconvenience rather than a crisis.

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