Deposits, what are the rules?

When you take a deposit, and hold it until the end of the bill, what do you do with it? Do you use it as part of your imcome from when you get it and just deal with not having money for the last invoice? Or do you put it in an account and actually save it until you need to attribute it to the final invoice?

If y ou do the latter, what account do you use? My sister and I were talking and she said there were certain rules with hold deposits, and that you are not allowed to earn interest on it. Her partner rented out his house, so obviously took a deposit, it was done through an estate agent. Is it true you are not allowed to put it in to a savings account?

Hi,

It's up to you how you use the deposit, I think there are options on the pacey contracts such as returning deposit, use it to count towards first fee's or use it for notice fee's. IMO you should hold on to the deposit and use it for final fee's just incase parents decide to up and leave without giving notice.
Hope it helps x

theoretically if we put them into a savings account then we should declare the interest as income - but annual interest on say £300 is only £11 even if you get 4.5% interest .

Ive got to admit I wont have that quandary , mine are spent despite promising myself I would put them to one side!!

I only take one weeks fees as a deposit and tell parents that it will come off final bill when child leaves - I haven't bothered putting it in an account, I have a receipt and parents have copy and one weeks fees isn't much to pay back - just means I'm working the last week for Free (depending on how much my rate has gone up between now and when child leaves off course). I think the deposit bonds are only for rental housing tenants, as if you pay a deposit to have eg: double glazing fitted, they don't pay the money into a bond, it just gets deducted from invoice.

There is legal rules regarding houses and the landlords have to register with a government approved bondsman.

For childminding I would put it into your accounts as income and then at the end of the year take it out and enter it into the following year until it is used at the end of a contract. this sounds confusing but its not

1. Put deposit into month you received it
2. In your final yearly summary sheet put "prepayment deposit for" and -£...
3. In the next year put prepayment deposit for x £

Hope that makes sense.

I'm new to this, but I was thinking of asking for first 2 weeks in advance and then at the end of that month them paying what's outstanding for the rest of the month.

I know this is more like a deposit, rather than up front payment, maybe too trusting...?

When parents sign a contract they should then pay a deposit...usually 4 weeks...regardless of when the care will start.
You hold on to that for as long as the child is with you.

When the child starts care you charge usual monthly fee ...the deposit can go into a savings account or used as you wish as it is part of your income.

When parents give you 4 weeks notice...they pay the usual monthly fee and at the end of the 4 weeks ...if no charges are outstanding ...the deposit is refunded.
I usually refund by cheque and sign off the contract showing clearly the deposit has been refunded as per agreement.

That way it balances out in your annual IR figures...what goes in will eventually come out and is accountable in your accounts.
For more info check with an accountant if you can.