Diminishing Capital – Income Support

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  • #45229
    stevedaymond
    Participant

    Hi all,

     

    We have received some evidence from the IS fraud team of a persons capital covering 7 years.  The capital is between £17k and £20k.  She has been overpaid £10k in income support.  I have asked why they have not applied the diminishing capital rule and they have advised it only gets applied if someone has deprived themselves of capital in the first place so they diminish a notional figure.  Is this correct, or do they need to apply diminishing rules against capital actually held?

    #127258
    walmslm
    Participant

    Assessors often get confused over terms and when it does and doesn’t apply, both at the DWP and LAs.

    Diminution of capital is when you reduce someones capital held in order to reduce the level of overpayment. It only covers the overpayment period and concerns actual capital. Once you get to the end of the overpayment period, the capital jumps back to whatever level it currently stands at. This is the one that is done in 13 week blocks. I think from the sounds of it this is what you are talking about.

    Diminishing notional capital only applies when a decision is made to include notional capital and is basically the principal of reducing the notional capital figure by the amount of HB and/or CTB and/or DWP benefits the person has lost as a result of including the notional capital.

    As far as I know both rules should be applied to IS cases just the same as HB/CTB decisions.

    The area that I find confusing is what happens when you create an overpayment by applying notional capital, which rule applies? :~

    #127264
    stevedaymond
    Participant

    Thanks for that Matthew. The customer had for the majority of the time £17k so a £10k overpayment didnt seem correct. Ill ask them to check the decision. :beer:

    #127327
    d-stainsby
    Participant

    Chapter and verse re diminution of capital is Reg 14 of the Social Security (Payments on Account etc) Regulations 1988 SI 1988 No 664 as amended. The Regulation provides:

    “Quarterly diminution of capital
    14.—(1) For the purposes of section 53(1) of the Act, where incomesupport , or state pension credit2, or income-based jobseeker’s allowance , or income-related employment and support allowance working families’ tax credit or disabled person’s tax credit has been overpaid in consequence of a misrepresentation as to the capital a claimant possesses or a failure to disclose its existence, the adjudicating authority shall treat that capital as having been reduced at the end of each quarter from the start of the overpayment period by the amount overpaid by way of income support , or state pension credit, or income-based jobseeker’s
    allowance , or income-related employment and support allowance, working families’ tax credit or disabled person’s tax credit within that quarter.

    (2) Capital shall not be treated as reduced over any period other than a quarter or in any circumstances other than those for which paragraph (1) provides.

    (3) In this regulation–
    “a quarter” means a period of 13 weeks starting with the first day on which the overpayment period began and ending on the 90th consecutive day thereafter;

    “overpayment period” is a period during which income support or an income based jobseeker’s allowance, , or income-related employment and support allowance working families’ tax credit or disabled person’s tax credit is
    overpaid in consequence of a misrepresentation as to capital or a failure to disclose its existence.”

    The proper interpretation of the rule was considered in CIS/2750/2007 and CIS/2365/2007

    The diminishing notional capital rule applies where a claimant is held to have deprived himself of capital as opposed to not declaring its existence. The relevant regulation for IS is Regulation 51A of the Income Support (General) Regulations 1987 SI 1987 No 1967 as amended. The Regulation provides:

    Diminishing notional capital rule
    51A.—(1) Where a claimant is treated as possessing capital under regulation 51(1) (notional capital), the amount which he is treated as possessing–
    (a) in the case of a week that is subsequent to–
    (i) the relevant week in respect of which the conditions set out in paragraph (2) are satisfied, or
    (ii) a week which follows that relevant week and which satisfies those conditions, shall be reduced by an amount determined under paragraph (2);
    (b) in the case of a week in respect of which paragraph (1)(a) does not apply but where–
    (i) that week is a week subsequent to the relevant week, and
    (ii) that relevant week is a week in which the condition in paragraph (3) is satisfied, shall be reduced by the amount determined under paragraph (3).

    (2) This paragraph applies to a benefit week or part week where the claimant satisfies the conditions that–
    (a) he is in receipt of income support; and
    (b) but for regulation 51(1), he would have received an additional amount of income support in that benefit week, or as the case may be, that part week; and in such a case, the amount of the reduction for the purposes of paragraph (1)(a) shall be equal to that additional amount
    .
    (3) Subject to paragraph (40, for the purposes of paragraph (1)(b) the condition is that the claimant would have been entitled to income support in the relevant week, but for regulation 51(1), and in such a case the amount of the reduction shall be equal to the aggregate of–
    (a) the amount of income support to which the claimant would have been entitled in the relevant week but for regulation 51(1); and for the purposes of this sub-paragraph if the relevant week is a part-week
    that amount shall be determined by dividing the amount of income support to which he would have been so entitled by the number equal to the number of days in the part-week and multiplying the
    quotient by 7;
    (b) the amount of housing benefit (if any) equal to the difference between his maximum housing benefit and the amount (if any) of housing benefit which he is awarded in respect of the benefit week, within the
    meaning of regulation 2(1) of the Housing Benefit Regulations 2006 (interpretation), which includes the last day of the relevant week;
    (d( the amount of council tax benefit (if any) equal to the difference between his maximum council tax benefit and the amount (if any) of council tax benefit which he is awarded in respect of the benefit week which includes the last day of the relevant week, and for this purpose “benefit week” has the same meaning as in regulation 2(1) of the Council Tax Benefit Regulations 2006 (interpretation).

    (4) The amount determined under paragraph (3) shall be re-determined under that paragraph if the claimant makes a further claim for income support and the conditions in paragraph (5) are satisfied, and in such a case (a) sub-paragraphs1(a) to (d) of paragraph (3) shall apply as if for the words “relevant week” there were substituted the words “relevant subsequent week”; and
    (b) subject to paragraph (6), the amount as re-determined shall have effect from the first week following the relevant subsequent week in question.

    (5) The conditions are that–
    (a) a further claim is made 26 or more weeks after–
    (i) the date on which the claimant made a claim for income support in respect of which he was first treated as possessing the capital in question under regulation 51(1); or
    (ii) in a case where there has been at least one re-determination in accordance with paragraph (4), the date on which he last made a claim for income support which resulted in the weekly amount being re-determined; or
    (iii) the date on which he last ceased to be in receipt of income support;
    whichever last occurred; and
    (b) the claimant would have been entitled to income support but for regulation 51(1).

    (6) The amount as re-determined pursuant to paragraph (4) shall not have effect if it is less than the amount which applied in that case immediately before the re-determination and in such a case the higher amount shall continue to have effect.

    (7) For the purpose of this regulation–
    (a) “part-week” means a period to which sub-section (1A) of section 21 of the Act (amount etc. of income support) applies;
    (b) “relevant week” means the benefit week or part-week in which the capital in question of which the claimant has deprived himself within the meaning of regulation 51(1)–
    (i) was first taken into account for the purpose of determining his entitlement to income support; or
    (ii) was taken into account on a subsequent occasion for the purpose of determining or re-determining his entitlement to income support on that subsequent occasion and that determination or redetermination
    resulted in his beginning to receive, or ceasing to receive, income support; and where more than one benefit week or part-week is identified by reference to heads (i) and (ii) of this sub-paragraph the later or latest
    such benefit week or, as the case may be, the later or latest such partweek;
    (c) “relevant subsequent week” means the benefit week or part-week which includes the day on which the further claim or, if more than one further claim had been made, the last such claim was made.

    The application of the diminishing notional capital rule was considered in R(IS)9/92, CIS/3268/2002 and CIS/3268/2002

    So now you know and you can now tell the DWP assessors exactly how to apply the rules!!!

    I think it would be rare to create an overpayment by applying notional capital, surely the starting point is actual (non declared) capital. This is even more the case with social security benefits, notwithstanding the changes to ESA and JSA following the coming into force of S105 of the 2012 Welfare Reform Act. Overpayments of social security benefits are generally only recoverable if they are in consequence of a misrepresentation or failure to disclose. following the coming into force of S105 overpayments of ESA and JSA are all recoverable but its arguable that if the decision the benefit was overpaid was made before 1 October 2012, the overpayment is only recoverable if there was a misrepresentation or failure to disclose a change of circumstances

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