deprivation of capital

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    I’ve been asked to provide some advice for our “social homebuy ” project on benefit issues for people buying either outright or shared ownership. This could be buying their current rented home or moving in ro a new property.
    The aspect that worries me most is notional capital where someone uses their own, or a relative’s, capital, as a deposit on the property.
    I’ve read a number of CD’s and regs – both for HB and for IS-but I’m still confused
    1) am i right in thinking that if a person uses their capital to pay a deposit, this will be regarded as deprivation? Commissioner Rice comments in R(IS) 13/94:
    “…in providing the deposit for the acquisition of the Council house the claimant deprived herself of capital”.
    I assume the same would apply to an RSL property.
    On the other hand I’ve read other things that make me think if someone bought a property (or share) in a home to secure their future they might avoid the “significant operative purpose” of gaining/ increasing benefit. Perhaps this would be more likely where the claimant was moving to a place more suited to disablement needs?
    2) if say a parent of a disabled person gave money for the deposit, could this also be regarded as notional capital? Even if the donor expressly states it must be for the deposit and nothing else?


    My understanding of ‘deprivation of capital’ is where a persons sole purpose was to dispose of capital purely to secure benefit.

    If the reasoning behind the spending of capital (for any purpose) is not to gain benefit, then I would say its ok.

    The problems of proving deprivation in order to progress an appeal to the Tribunal Service is one thing – how can you prove it? – unless the claimant actually states they only used their capital so they could gain benefit – how would you do it?

    I usually ask to see receipts and such – if they are in order, I would agree the expenditure and adjust the capital figure accordingly.


    If the idea was to buy the property outright or part, then it cannot affect HB because owner-occupiers are not entitled to HB. It MIGHT affect IS mortgage relief but as there is no entitlement for such a long time, I doubt it.


    the sort of scenario i was considering would be where someone had some capital- either from a relative or of their own- used it to put down a large deposit on either a whole proerty or a shared ownership, then claimed IS or ibJSA or gPC on what mortgage interest payments they had left to pay; and maybe (in shared ownership cases) claimHB on the rent.
    Again, this is for my organisation’s plans for expanding social homebuy. From my reading of the regs HB looks ok, whether its a gift from another used for a third party ( building society) or own capital used to buy a house (because its not for food or household expenses) but the IS etc rules look more dodgey.
    Again this is looking at ensuring we don’t pout people in a worse position than they were before, while still allowing them choice.
    does that make it any clearer? sorry i didnt put it clearly first time.

    Kevin D

    This earlier thread on deprivation / notional capital may help:


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