Capital issues

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    Help needed

    Families are currently homeless residing in two temporary furnished flats (large family) and are due to move into permanent housing through a Housing Association shortly. The family relies on state income only and rent is met through housing benefit.

    The family will receive a payment of £24,000 shortly following the proceeds of selling their previous home.

    The family has current debts totaling £67,000. The debts are owed to other extended family members for the repayment of supplies purchased for a shop they previously owned.

    The family wishes advice on whether they can pay the £24,000 to their extended family for existing loans without affecting their housing benefit entitlement?

    If this was possible, what proof of debt and payment would be required and would HB require to be notified?

    Thank you for any advice you can offer?


    The only question you have to ask is: what is the claimants intention by repaying the debt?

    If the intention is to reduce the capital in order to obtain some or more HB then the deprivation rules apply.

    If the claimant or partner is over 60 repayment of any debt cannot be counted as deprivation regardless of intention.

    If there is a debt, and you are satisfied that the debt exisits and it is reasonable for the claiment to repay this now they have funds available (and repayment is not a convenient way of disposing of capital to gain benefit) then there is no depriviation. It could be the case that unless they make their repayment now there is no realistic possiblity of them ever being in the position to do so in the future.

    I would suggest you obtain whatever paperwork there is concerning the terms of the loans and conditions for repayment. If they are verbal agreements then considering the amounts invovled it may be advisable to ask for statements from the parties concerned to establish what was the original expectation for the repayment of the loan. Once repayment is made I would ask to see bank statements showing the new level of capital and something to confirm receipt of payment against the loan.

    Kevin D

    The test is the usual:

    “Significant operative purpose”.

    Not necessarily the dominant purpose, just [u:1df048eba7]a[/u:1df048eba7] significant operative purpose.


    You should also remember that if they hold the capital themselves for a period, whilst they actually have it, it counts as capital, and so they would be over the capital threshold, meaning that a new claim will have to be made once they have paid their debts.

    Unless I’m missing a reason that the capital can be disregarded for a period…

    (an older, wiser) Jon

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