tenants wanting to deduct rent from deposit

Tenancy Deposits

My Tenants moved into my flat in 2006 and paid there deposit then, they have not moved out since then and have been renewing their contracts. They wish to leave now but will not pay the last months rent and want to deduct it from the deposit. The deposit was not protected as it was given before the scheme came out. Should i have protected it afterwards? As the tenants have been living at my flat for 2+ years there is alot of wear and tear and damage...they also have a telephone line/internet etc, what if they do not pay their bills? i do not know what to do as they will not let me arrange any viewings of the flat and will not pay the rent.