It goes without saying that business records and company contracts need to be kept while they're still in effect, but what about after they expire? Paul Ravey of Access Records Management explains all.

What is the Limitation Act 1980?

The purpose of the Limitation Act 1980 is simple: it sets time limits on various types of legal action. From this, businesses can determine how long they need to keep documents in case they are required to produce them in court. This statutory 'limitation period' therefore defines the minimum length of time a business should keep its records.

Section 5 of the Limitation Act 1980 sets out the "time limit for actions founded on simple contract," and - in full - states that "an action founded on simple contract shall not be brought after the expiration of six years from the date on which the cause of action accrued."

So what does this mean? First, we need to understand some definitions:

• A "simple contract" is an agreement, written or oral, which has been accepted as legally binding by both parties. For businesses, this means employment contracts, business agreements, insurance policies, personnel files, and various other documents. A simple contract is treated differently from a deed, which is a more formal document requiring the signatures of multiple people.
• The "action" that this legislation refers to is a civil claim. In a business context, this will usually be a dispute over the terms of the agreement. These conflicts are easily resolved by producing the original document, which is why it's crucial to keep the document safe and accessible.
• The legislation establishes the limitation period as six years after "the date on which the cause of action accrued", meaning the date on which the claimant brings their breach of contract case to court.

How long should businesses keep contracts?

So, in short, Section 5 of the Limitation Act 1980 states that legal action must be brought within six years of the issue arising. Businesses, then, have a responsibility to keep these documents for at least six years after they expire so they can refer to them if there's a disagreement.

Does this apply across the UK?

A few things are worth noting regarding this act when it comes to records retention. The first is that this law applies to England and Wales. Scotland has its own legislation regarding claims, so companies operating out of Scotland should refer to the Prescription and Limitation (Scotland) Act 1973. Similarly, Northern Ireland is covered under the Limitation (Northern Ireland) Order 1989.

What about records in other industries?

Additionally, certain types of documents carry unique retention periods. Other legislation sets out the retention period for records involving:

• minors
• pension information
• medical records
• records of accidents and injuries
• documents regarding the handling of hazardous materials

Given the varying legislation for these different record types, it's crucial that your organisation conduct the required research to ensure full compliance.

Even ignoring the legal requirements, these documents are useful to keep on hand. They can act as reference if you need to show a new hire an example contract, as a template if the company is drafting a similar agreement, or to show clients the terms of prior arrangements. If the documents are lost or inadvertently destroyed, it's the business' responsibility to inform HMRC immediately.

What is the record retention period for companies in the UK?

Overall, most documents a business will create are covered by Section 5 of the Limitations Act 1980 and should be kept for six years after they expire. This ensures that the documents are available if a civil case is brought against the company. More niche record types can have separate, specific legislation which may fall under different retention terms. It is therefore crucial that companies do their research to store their records securely and archive them in such a way as to be easily accessible.

About the author

Paul Ravey is the Manager at Access Records Management. The company specialises in providing affordable, professional records management for individuals and SMEs across the country.

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Find out more

Limitation Act 1980 (Legislation)

Prescription and Limitation (Scotland) Act 1973 (Legislation)

Limitation (Northern Ireland) Order 1989 (Legislation)

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