Payments made for transmission on

I’m after advice on how to handle this type of transaction. These relate to rental income
Tenant pays £1,000 into my account. £500 is a “sale” as rent, but the other £500 is a deposit which has to be paid on to DPS.
I can create (and pay) an invoice for the £500 rent, but how do I deal with the deposit.
I can’t treat it as £1K income and £500 expense because that inflates turnover and the deposit was not an expense as such because the tenant gets it back when they leave.
I’m thinking some sort of bank account called DPS might be the way, but can I then split the payment between the two. There is also a problem when the tenant leaves because DPS will refund the tenant directly and I will have a negative bank account called DPS which will keep getting bigger and impact the balance sheet.
Any advice appreciated :wink:

Hi @Scooby_7,

I have found an answer on an older post which you may find helps you:

Thanks Beth - that was my initial thought, but the problem with it is that DPS do NOT repay the money to the landlord so it would be easy for the “bank accounts” to become out of step with DPS. Furthermore, it isn’t strictly accurate in accounting terms since the money is nether an asset nor is there a liability from DPS relevant to this business’ accounts.

On the accountingweb link you sent me, another contributor posted

You’ll need to keep a memorandum record of the deposits you have taken and not repaid but where you have paid the money on to the DPS there is no asset or liability to enter in your accounting records.

For that reason I now think I will treat the deposit as a “refund” to the customer (tenant). That gets it out of my accounts and although the money has been paid to a third party (DPS) it is effectively still the customer’s money and in no way belongs to the business.

But you know when roughly the dps will repay the tenant, so you simply add a transaction yourself to that bank account to clear the balance and mark it as repaid.

I’m not sure if quickfile let’s you have a bank account that doesn’t show on the balance sheet. But I’d be inclined to ignore it when preparing the accounts. Granted you may find it difficult to balance if you don’t know what you are doing.

One way you could trick it is if you go into the chart of accounts, find the nominal that corresponds to the DPS bank account and tick the box allowing that nominal to be used on sales invoices.

Now when you invoice the tenant you include the deposit on that invoice as a separate line (no VAT, if you are registered), click the cog wheel icon and change the category for that line to the DPS bank account. The sales invoice line will show as “money out” on that bank account.

The tenant pays you including the deposit, you tag that as payment from a customer.

When you pay out the deposit to DPS you tag that as a transfer from your current account to the DPS account, which should return the balance there to zero.

The only wrinkle with this approach is that if you’re VAT registered you’ll need to manually adjust box 6 down on your VAT return by the amount of the deposit to exclude it from your sales turnover.

It’s not that simple Paul - Keeping track might be OK if you only have a couple of properties, but with several hundred it becomes impossible. We also have some (overseas) tenants where we have released the deposit but DPS have been unable to contact them so the money is still sitting there (in one case 2 YEARS) after they moved out.

In any case I think it is just wrong to be recording what are fake assets and liabilities (even though they should balance) because that money (the deposit) is nothing to do with this business.

It’s actually very easy - just receive ALL the money paid by the tenant as rent, then create a refund to the tenant for the deposit amount and tag it to the money going out. The accounts are now straight and there is nothing to “keep an eye on” - job done!

I can see it works mathematically but as you say it needs careful treatment. The refund approach is much simpler

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