PIM1052 - Income chargeable: deposits or bonds taken from tenants

Where a landlord is operating the cash basis, deposits paid by tenants or licensees may be receipts of a property business. PIM1094 explains when deposits should be recognised as receipts.

For landlords not on the cash basis, deposits should be recognised in accordance with generally accepted accounting practice, normally by being deferred and matched with the costs of providing the services or carrying out repairs. To the extent that a deposit taken from a tenant or licensee exceeds the relevant costs, and is subsequently refunded, it should be excluded from the receipts of the property business.

Deposits, bonds and similar which are not refunded at the end of a tenancy should be included as income at that point to the extent that they have not already been recognised.