Separating damage deposits from income

Agencies and other headaches, keys and cleaners, running costs and contracts...in short, all the things we spend so much of our time doing behind the scenes.<br>
Eclipse247
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Separating damage deposits from income

Post by Eclipse247 »

Hi
Any info on separating damage deposits from income for accounting purposes much appreciated, particularly when statements don't show guest names and payments in to the account include damage deposits.

Thanks
ellerhow
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Post by ellerhow »

We have a column titled transfers and contras on both the income and expenditure sheets so it is never classed as income....it just comes in and goes out.
You have to be fairly up to date with your book keeping/ accounts so that you can remember who paid what and when!
Eclipse247
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Post by Eclipse247 »

Thank you ,I was guessing that was the way to record it.For clarity, if a payment is for balance due + security deposit ,you deduct security deposit and enter that as transfer in and record balance as income.
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Lets Go To Puglia
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Post by Lets Go To Puglia »

Security deposit is a creditor (i.e. you owe it back to the guest) until it is refunded. Just keep a separate column or account for your security deposits.

We collect security deposits separately a day before guests arrive so there is never any danger of them being mixed up with income. Even on a bad day!
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AngloDutch
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Post by AngloDutch »

We have often wondered about this.

We ask agency guests to transfer additional costs (energy, cleaning, bed linen, tourist tax and the security deposit) to our private bank account. This works out much better than having it transferred to our business bank account as otherwise we would pay VAT on the tourist tax and energy, which is not something we want.

Also, it is very difficult for us to accept the additional costs in cash, as we now use an internet bank for our business where it is not possible to deposit money.

We do get bookings from our own Dutch-language site where we have set lower rates plus additional costs. Guests paying via bank transfer pay everything over to our business bank account, so we do pay VAT on these costs which is unavoidable. Unfortunately it is impossible to have 'all-in' rates for our local market as we would otherwise price ourselves too high as it is normal here in the NL to have lower rates plus additional costs separately (the same goes with all the local agencies we work with here. With the agencies we receive a net payment and have to collect the additional costs from the guests ourselves).

Another thing we have seen with acceptance of a security deposit is what happens when you get a cancellation after guests have paid the full amount (first by 20% deposit and then the remaining balance). We have always taken the total amount and had deposit at 20% and balance at 80%.

Recently some guests did cancel outside of 6 weeks before arrival. They were still entitled to an 80% refund but complained that they should get an 80% refund of the rate and additional costs, plus the whole security deposit as well.

They were therefore asking for a complete refund, as the total amount was €1000 including the security deposit of €200! They eventually said that they would claim any amount not refunded from their holiday insurance, so we did not have to increase the refund. But this has made us think that maybe we have to keep the security deposit completely separate from the payment percentages (20% of the rate including any additional costs, plus the €200 security deposit. Then 80% of the rate/any additional costs as the balance payment).

There is always some new scenario that you can come across even after running a holiday home for more than a decade!
newtimber
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Re: !

Post by newtimber »

AngloDutch wrote:We have often wondered about this.

We ask agency guests to transfer additional costs (energy, cleaning, bed linen, tourist tax and the security deposit) to our private bank account. This works out much better than having it transferred to our business bank account as otherwise we would pay VAT on the tourist tax and energy, which is not something we want.
I don't think you meant to say this.
It doesn't matter which bank account you put it into as to whether you ought to pay/charge VAT or not.
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AngloDutch
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Re: !

Post by AngloDutch »

newtimber wrote:
AngloDutch wrote:We have often wondered about this.

We ask agency guests to transfer additional costs (energy, cleaning, bed linen, tourist tax and the security deposit) to our private bank account. This works out much better than having it transferred to our business bank account as otherwise we would pay VAT on the tourist tax and energy, which is not something we want.
I don't think you meant to say this.
It doesn't matter which bank account you put it into as to whether you ought to pay/charge VAT or not.

The tourist tax is zero rated and so is the security deposit of course, which is of course (usually!) refunded anyway.

So, if we have the option to ask guests to pay the additional costs separately (agency booking, etc.) then it is better to pay these costs into our private account, as we cannot reclaim the VAT on these amounts when it's run through the business account. We pay the energy costs for our holiday rental from our own private account (as the holiday farmhouse is attached to our home, on the same meter), so are already paying VAT (at 21%!) over that.

The problem is that if the additional costs are paid as a single amount, then the office that handles the administration for us will calculate VAT at 6% over the whole incoming amount, which is the reason why we try and get as much channelled through our own account. The tourist tax is quite a lot per year for us and, although alot of it goes through the business account (where we are of course having to pay 6% over an amount that we have to hand over to the council offices at the beginning of each year).

Certainly not trying to cheat the tax office, but don't believe that we should be paying VAT over tourist tax which we cannot increase to include VAT before we charge this to incoming guests.

How do other owners handle this?
newtimber
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Re: !

Post by newtimber »

AngloDutch wrote:
The problem is that if the additional costs are paid as a single amount, then the office that handles the administration for us will calculate VAT at 6% over the whole incoming amount, which is the reason why we try and get as much channelled through our own account. The tourist tax is quite a lot per year for us and, although alot of it goes through the business account (where we are of course having to pay 6% over an amount that we have to hand over to the council offices at the beginning of each year).
It sounds like you are in a special VAT scheme and so don't have to work out VAT on receipts and payments accurately and subtract one from the other - perhaps the scheme assumes that on average a holiday let would end up paying 6% net on the receipts. I'm not familiar with VAT in your country and whether under the rules of the scheme, not including some of your receipts is allowed.
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AngloDutch
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Re: !

Post by AngloDutch »

newtimber wrote: It sounds like you are in a special VAT scheme and so don't have to work out VAT on receipts and payments accurately and subtract one from the other - perhaps the scheme assumes that on average a holiday let would end up paying 6% net on the receipts. I'm not familiar with VAT in your country and whether under the rules of the scheme, not including some of your receipts is allowed.
Yes, newtimber, VAT is 6% over the rental amount here. Our bookkeeper will just calculate 6% over any incoming rental payments (whether those full or partial payments are based on 'all in', or tariff plus separate additional costs of energy, tourist tax, etc.) 'All in' of course includes calculated amounts to cover the additional costs, and as we don't split those costs, we can't expect not to be charged VAT on those amounts. It's just that we sometimes believe that we shouldn't be charged VAT on tourist tax when it is shown split in the rate calcuation on the booking confirmation.
But we now know why so many owners who have to collect tourist tax ask for it to be paid separately in cash on arrival :wink:
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charles cawley
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Post by charles cawley »

I'm with Lets Go To Puglia on this.

Handling damage deposits can be a bit of a nightmare. If you are very busy, the chance of forgetting to return them or making a mistake can radically increase.

Our bank offers us an account that carries no charges designed only to take money with no other services. We use it for any damage deposits owners wish us to handle and other exceptional transactions.

It makes things easier
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