Rent setting for housing benefit/benefit tenants

Tax Planning and Financial

Hello
I manage a small company under the Governments Supporting People initiative for persons with mental health issues - this is a housing related support. We are paid by our local council for their day-to-day support and also receive housing benefit for them. All our service users are receiving benefits.

I am presently undergoing contract negotiations for our new 3 year steady state contract and one of the conditions I have to abide by is rent setting. At present my company sets a rent of £120 per week across the board - some of our service users (we have 14) live in independent accommodation, some in shared accommodation but the rent set is the same. We do not receive anything like the rent set from housing benefit for any of our service users, and I have been told that this is potentially fraudulant as we do not ask the service user to pay the difference between the rent set and the housing benefit paid, and for some reason this is illegal. Can anyone give me legal advice on this as I am very woolly as to how I set a rent and I want to get it right as I am one of the landlords! Some of our service users pay their own electricity etc. charges some don't, but all pay £10 towards their utility charges, the actual cost of their telephone calls, we pay the line rental. I think some of the problems with the local council are that they feel the "loss" may be being picked up with the support money through the gov. contract. I also need some advise on our current shorthold tenancy agreement. Any advice please would be gereatly appreciated