Capital and commerciality

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  • #39988
    selina_neville
    Participant

    Hello guys, I have a case where I’m thinking we should not be paying HB but since this is a 2nd revision request I want to be sure that I am not coming to wrong conclusions.

    Background: The claimants (a couple of pensionable age) lived in Wales but wanted to be close to their family for support in this borough.

    They sold their house in Wales and made £115,000; they paid off about £20,000 to clear debts and bought a car. They transferred the balance of around £70,000 to their daughter who used this money to pay a deposit on a house which she then rented out to them, charging them around £400 per month which is what she pays on the mortgage.

    They put in a claim for HB/CTB about 6 months after moving in and asked for a backdate stating that they did not think they could claim HB since the LL is their daughter. They are now quoting Reg 49,, DWP HB/CTB guidance P1.730 and P1.731 finally Judge Turnbulls judement in case CJSA/1425/2004, but using the author of the letter’s emphasis.

    Basically claimants are saying that they had no choice but to sell previous home. Due to their age and financial circumstances, they would not have been able to secure a mortgage to buy another property. Their daughter wanted to buy another property to let, but could not afford the large deposit required and their circumstances provided a solution.

    We asked for bank statements to see if they have been paying their “rent”. Some statements were provided (not for the whole period) and whilst we could see some payments made to duaghter in the amount of the rent, we have not sighted proof that they paid every single month.

    The rent amount charged does not reflect a commercial rent for this area however they did put in £70,000 of their own money into the house which is now in the duaghter’s name. I am not sure whether we would turn this down on the grounds that they are deemed to still have that capital, or on the grounds of non-commerciality (daughter says if they did not pay she would have to look for other tenants even though I don’t see how this would work since they gave her the £70,000 for the deposit!!!)

    If they rented elsewhere they would be able to get around £650 pcm in HB so this is considerably cheaper at £400 pcm but then it also seems they found a way to have their cake and eat it by buying a property and asking for HB to pay the mortgage!

    Are we right in turning down again based on the capital issue? This will most probably go to appeal as I get the feeling they won’t be backing down.

    Thanks

    #114140
    Andy Thurman
    Keymaster

    [quote=selina_neville]They put in a claim for HB/CTB about 6 months after moving in and asked for a backdate stating that they did not think they could claim HB since the LL is their daughter. They are now quoting Reg 49,, DWP HB/CTB guidance P1.730 and P1.731 finally Judge Turnbulls judement in case CJSA/1425/2004, but using the author of the letter’s emphasis.[/quote]

    Perhaps it’s my mood today but….

    Are their legislative arguments directly responding to an initial decision? i.e. Was “depravation” of capital used in deciding not to pay HB?

    Usually, a time lag between disposal of capital and an HB claim suggests there was no “primary purpose” involved, but I have to say this whole scenario raises my suspicions. How did they suddenly reach the (evidently firmly believed) conclusion that they could claim having initially thought that they could not?

    When they gave away their £70k, how were they expecting the arrangement to be afforded?

    The whole thing smacks of “contrivance” (possibly backed up with alternatives) but the argument would need to be very carefully made – you need to focus on the decisions taken follwoing the sale of the original property. As hinted at above, I cynically feel that the delay in claiming was a smoke screen and that there has been a substantial knowledge of HB rules from day 1 – even down to the claim arriving at the 6 month backdate limit (even though they’ve made an error on that one due to difference between working & pension age rules!!)

    #114144
    selina_neville
    Participant

    Thanks Andy, you more or less confirmed what I was thinking too… I just know these people will appeal and that is why I wanted to see what other AOs thought before the revision request is turned down again.

    #114153
    Kevin D
    Participant

    Just a point of clarity in relation to deprivation / notional capital. The test is about whether the disposal of capital was with “a significant operative purpose” to obtain / increase benefit. It doesn’t have to be the main or sole reason. There is also case law that suggests deprivation can be found to have occurred where a person disposes of capital without regard to future financial consequences.

    Depending on all of the informaton and evidence, it could be that both “taking advantage” and/or notional cap are at issue. There is nothing wrong in making a decision with both alternatives, so long as they are clearly distinguished.

    #114165
    selina_neville
    Participant

    Thanks guys for your advice 🙂 What would I do without HB Info!

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