Diminution of Capital

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    No, it not another post about how to calculate dim of cap but a slightly more prosaic query.

    A claimant received Income Support from 2007 – 2011. The DWP notified us that her IS has been ‘cancelled’ from 2007 because her capital exceeds the prescribed amount.

    An overpayment of HB and CTB has been created from 2007 – 2011.

    I have diminuted her capital in line with Reg 103 and at a point in 2008 her capital falls below £16000.00 (for HB but not for CTB).

    Here is my question: at that point in 2008 do I assume that she should have been entitled to IS (seeing as the only reason she was not entitled was excess capital)? In which case her o/p from 2008 will be completely wiped out.

    Or do I re-calculate the o/p period based on the actual money she received from IS plus the tariff income from the capital (which seems unfair since she will, no doubt, have to pay that money back)?

    Or do I re-calculate on just the tariff income from the capital? Which again, would wipe out the o/p from 2008?.


    Entitlement to IS has been removed, so there is no provision to treat claimant as if she was still entitled.

    She will have to pay the overpaid IS back to the DWP, so it should not be counted as income.

    That leaves option 3.

    There is a theory that once capital is diminished below £16,000 you cannot diminish any further. Some lively discussion here:

    Reg 103 – Diminution

    How do I calculate this overpayment?

    But in your case, where there is no other income, it doesn’t really matter whether claimant has tariff income of £39 since it will always be below the applicable amount. So once you have diminished to under £16K, full entitlement is restored for the purpose of calculating the O/P.


    Thanks Michael. That makes sense.


    I think I may have miss-stated the theory championed by Kevin in those threads. As I understand it, the wording of working-age HB reg 52(1) (and the equivalent WA CTB reg) means that diminished capital below £16K does not attract tariff income. Tariff income can only be calculated based on actual capital, which means that as long as actual capital exceeds £16K you are stuck with £40 tariff income regardless of diminution.

    The wording is different in the pension-age regs which points to this being a drafting error.

    In your case this wouldn’t make a difference since there is no other income.

    In the past I have always calculated tariff income based on the diminished capital – it is fairer to the claimant and this is clearly how the regs are intended to operate. But then again, not much about diminution is fair – why for example are there seperate calculations for HB, CTB and any DWP benefits? It’ll be interesting to see whether diminution is incorporated into Universal Credit.


    Yes I read that thread between Peter Barker and Kevin. I am inclined to go with Peter on that one – I can’t believe that the intention of reg 103 and reg 52(1) is that there is no tarriff income on diminished capital below £16K.

    And, like you have said, it makes no difference to my case since the total income is below the aplicable amount anyway.

    Anyway, its Friday afternoon and almost :beer: time. Have a good weekend.

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