The reg 103 process is intended to take account of what would have happened if the clmt had, instead of accumulating (further) capital, been awarded HB at a lower rate to take account of the £15k – they would have had less HB, paid more of the rent themselves, and hence accumulated less capital. It’s part of calculating the net overpayment.
That’s different to UE, which comes about from reg 104’s requirement to calculate the overpayment ‘as if the correct circumstances were known at the time’. Clearly the capital reduced by reg 103 would not be ‘the correct circumstances’ as the actual capital is reduced by the overpayment.
So, yes, it is incorrect to apply reg 50 to actual capital.
CH/0317/2007 is a useful case on reg 103, but there are probably others.
