Not option 1. I don’t see how you can offset the o/p and u/p if they are for different periods.
I would pay the u/p and then consider if the o/p was recoverable. With the problems that most LA’s are having with TC calculations I think you would have a job to prove that the claimant could have reasonably known that the TC income was incorrect, especially if your original calculation was to divide by 366 and multiply by 7. They may have considered this to be perfectly reasonable.
If the claimant did know how the calculation should be done I would offer them a job immediately!
