Does this suggestion get around Rent Deposit Scheme

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  • Does this suggestion get around Rent Deposit Scheme

    Below is a suggestion by a contributor from another website in another forum about the Rent Deposit Scheme.

    Is it legal, will it stand up?


    "A way I have found round the TDS which may help you:

    Deposit required £450

    Tenancy duration 12 months,

    take no deposit, add £37.50 per month onto the rent, on your AST in the section "extra conditions" add the phrase or similar "upon completion of tenancy provided property is left in a clean & tidy condition with no outstanding debts, £450 will be refunded upon vacant possession" hope this helps."

  • #2
    Hi Scroates,

    My feeling on it is it is a deposit in all but name. I personally think if a tenant was to take action on the grounds that it is a deposit I think they may win. I dont think it will work but thats just my opinion.

    Looking to see what others think on the matter.

    Jax

    Comment


    • #3
      Originally posted by jax2503 View Post
      Hi Scroates,

      My feeling on it is it is a deposit in all but name. I personally think if a tenant was to take action on the grounds that it is a deposit I think they may win. I dont think it will work but thats just my opinion.

      Looking to see what others think on the matter.

      Jax
      I agree with you jax, it's a deposit by another name, although frankly it seems more of a risk for the LL who has to extract a further lump of money every single month - with all the risks of non-payment - than extracting it in one go at start of tenancy when T is generally more able/willing to pay it. Half way through tenancy what's to stop T actually refusing to pay the extra £37? Then Ll would have nothing to fall back on if serious damage is done. No-brainer. If extra charge is not shown separately, i.e. if it appears as part of the rent, then rent is going to appear out of line with other similar props whose LLs take deposit, so Ts will be (even) harder to find.

      I head of a similar, but more intelligent, wheeze where LL collected a socking great 'advance cleaning fee' of £300 per tenant, put in his bank account, and said the total (£1200) could be used either to pay a professional cleaning company and handyman at end of tenancy, or could be paid back to the tenants if they did all cleaning and minor repairs/redecoration themselves (subject to his approval, of course).

      Is it a cleaning fee or is it a deposit?!
      'Pause you who read this, and think for a moment of the long chain of iron or gold, of thorns or flowers, that would never have bound you, but for the formation fo the first link on one memorable day'. Charles Dickens, Great Expectations

      Comment


      • #4
        Hi MTG,

        Still think it is a deposit, albeit another name. I feel that if it can be proved and you issue S21 notice it could be thrown out on a technicality. Not worth the hassle in my books.

        Now to throw a spanner into the works. Lets say it is a HMO for instance, you can collect a severe admin fee. Now that cant be classed as a deposit. I have taken admin fees for my DSS lets in which case,I take the rent in advance and a £250 admin fee. It means it is more affordable for the tenant and either way I as landlord keep the admin fees, the tenant keeps the extra in there pocket and I feel works well. If a tenant cant build up a deposit they tend to stay longer as they cant afford to move. Works for me anyway.

        Jax

        Comment


        • #5
          Originally posted by jax2503 View Post
          Hi MTG,

          Still think it is a deposit, albeit another name. I feel that if it can be proved and you issue S21 notice it could be thrown out on a technicality. Not worth the hassle in my books.

          Now to throw a spanner into the works. Lets say it is a HMO for instance, you can collect a severe admin fee. Now that cant be classed as a deposit. I have taken admin fees for my DSS lets in which case,I take the rent in advance and a £250 admin fee. It means it is more affordable for the tenant and either way I as landlord keep the admin fees, the tenant keeps the extra in there pocket and I feel works well. If a tenant cant build up a deposit they tend to stay longer as they cant afford to move. Works for me anyway.

          Jax
          Don't you have to justify what you do for your 'admin fee' to anyone? The tax office, for example?
          'Pause you who read this, and think for a moment of the long chain of iron or gold, of thorns or flowers, that would never have bound you, but for the formation fo the first link on one memorable day'. Charles Dickens, Great Expectations

          Comment


          • #6
            Hi MTG,

            Yes you have to justify what you do with it as it is classed as income, but I self generate an invoice for a consultancy fee, hence making no profit and not having to pay tax.

            Jax

            Comment


            • #7
              But no-one has consulted you - or, if they have, your 'advice' does not seem to have been worth £250 per tenancy. You seem to me to have made a profit of £250 for doing no work.
              'Pause you who read this, and think for a moment of the long chain of iron or gold, of thorns or flowers, that would never have bound you, but for the formation fo the first link on one memorable day'. Charles Dickens, Great Expectations

              Comment


              • #8
                Originally posted by jax2503 View Post
                Hi MTG,

                Yes you have to justify what you do with it as it is classed as income, but I self generate an invoice for a consultancy fee, hence making no profit and not having to pay tax.

                Jax
                I might try that with my income, pay myself to ask myself questions, I might expect a refund at times due to bad advice though and it sounds like TAX evasion to me?
                I also post as Moderator2 when moderating

                Comment


                • #9
                  Originally posted by Mars Mug View Post
                  I might try that with my income, pay myself to ask myself questions, I might expect a refund at times due to bad advice though and it sounds like TAX evasion to me?
                  Without wishing to fling accusations at anyone in particular, I incline to your view.

                  I ask myself all sorts of questions during my working day (mainly, 'Why I am here?' and Which slimeball took the last teabag?') some of which have no answers. Certainly not ones which are recordable, anyway. It would be very nice, I agree, to be able to claim against tax for this kind of self-consultation process.
                  'Pause you who read this, and think for a moment of the long chain of iron or gold, of thorns or flowers, that would never have bound you, but for the formation fo the first link on one memorable day'. Charles Dickens, Great Expectations

                  Comment


                  • #10
                    I would be interested to hear of other members' views on the legality if this one (#4 and #6)?
                    'Pause you who read this, and think for a moment of the long chain of iron or gold, of thorns or flowers, that would never have bound you, but for the formation fo the first link on one memorable day'. Charles Dickens, Great Expectations

                    Comment


                    • #11
                      I hold all my places through a company, the company pays my salary. I suppose that if I had to I could charge the company for any extra work I did for it. I don't know what happens for a sole trader, without a company, though.
                      I offer no guarantee that anything I say is correct. wysiwyg

                      Comment


                      • #12
                        Originally posted by jta View Post
                        I hold all my places through a company, the company pays my salary. I suppose that if I had to I could charge the company for any extra work I did for it. I don't know what happens for a sole trader, without a company, though.
                        Is that the issue?

                        I think Mars Mug and I were questioning the legality/morality of using a non-existent consultancy service for tax offsetting/avoidance purposes, or at the least, a consultancy service in which £250 is charged for an unrealistically small amount of work.
                        'Pause you who read this, and think for a moment of the long chain of iron or gold, of thorns or flowers, that would never have bound you, but for the formation fo the first link on one memorable day'. Charles Dickens, Great Expectations

                        Comment


                        • #13
                          But can they not just set the amount they want to be paid for their time, it may well seem to be excessive, but is it illegal?
                          I offer no guarantee that anything I say is correct. wysiwyg

                          Comment


                          • #14
                            Originally posted by jta View Post
                            But can they not just set the amount they want to be paid for their time, it may well seem to be excessive, but is it illegal?
                            I don't know. I'm sure plenty of 'consultants' to large organisations get away with charging ludicrous fees, but I'm just asking if you are allowed to charge to yourself (and then pay no tax) on 'invented' work.

                            If Ls aren't allowed to charge £25 to send out a letter reminding Ts to pay their rent on the grounds that it is not a realistic rate charge for the work done, what's the moral difference? I appreciate that one amount is a charge and the other is a fee, however...

                            I'm sure jax will find a way round it one way or the other.
                            'Pause you who read this, and think for a moment of the long chain of iron or gold, of thorns or flowers, that would never have bound you, but for the formation fo the first link on one memorable day'. Charles Dickens, Great Expectations

                            Comment


                            • #15
                              Originally posted by mind the gap View Post
                              You seem to me to have made a profit of £250 for doing no work.

                              Obviously you have not required the services of a plumber of late !
                              Or an hour of legal representation ?

                              The Rodent
                              A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.
                              W.Churchill

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