HB/CTB/IS overpayment + Underlying entitlement recovery of Overpayment

Would really appreciate any suggestions advice regarding the following case. Substantial overpayment of IS HB CTB occurred due to client with severe mental health issues being unaware capital £45000 invested for him from late fathers inheritence. IS HB CTB was incorrectly received from 2006 - 2012 but my issue is the amount now being recovered - a total of approx £49000 - (Yes £4000 more than his capital!) Unfortunately IS decision was not appealed and HB tribunal have decided original amounts still recoverable as ‘there is no provision’ to reduce amount of overpayment.

The argument here was that had the OP not occurred and the client had used his capital to fund his rent and living expenses etc , he would have fallen below the capital levels probably around 2009/2010 and therefore been eligible to correctly receive IS Max HB/CTB from that date.

However because his capital throughout the period of the Overpayment exceeded £16000 its seems he cannot be considered to have had any underlying entitlement throughout the whole period to offset, and reduce the total OP now being recovered.

Would really appreciate any ideas or thoughts of how this may be addressed. Case has been heard by 1st Tier Tribunal considering whether to try 2nd Tier, if can establish grounds etc. Just seems so perverse that recovery amounts can exceed the capital levels he held, and there is no way to address.

Would welcome any suggestions or ideas

For the IS overpayment, have you checked whether they applied reg.14 of Social Security (Payments on Accounts etc) Regs 1988, whereby they are supposed to undertake quarterly diminution of capital into account and reduce the capital by 13 week’s equivalent of IS throughout the period in question? (see p.1224 CPAG WBH 2014-15).

I find that this is often missed by DWP and can result in quite significant reductions in associated overpayments. If this is missed out, it’s a clear error in law of the FtT decision.

Same applies in HB: “diminution” of capital they call it.

It should have been obvious to the Council (and to the Tribunal who heard the appeal) that diminution applies here.  As a rough rule of thumb, if the amount of capital is less than the overpayment plus £16,000 then diminution is going to make a difference.  That is quite clearly the case here.

It is an absolute nailed on ground for appeal to the UT: the FtT should immediately see its error when it receives the application for permission to appeal and should review the decision without it having to go to the UT.  Even if the one month time limit has already passed I cannot think of a more compelling case for the Tribunal to waive it.

It is HB Reg 103 by the way.

In terms of recoverability was the client aware or not of the capital?

If not, then worthwhile putting this issue to the UT as o/p recoverability criteria is different from entitlement criteria.

As Paul mentions, the dimunition of capital will reduce capital over time - this potentially gives you a ground to appeal on the basis that the LA did not consider these deductions and therefore the o/p figure is incorrect by a few years.

It is not uncommon for the overpayment to exceed the capital held. 

It is always worthwhile checking the dates the LA/DWP seek to recover from.  I have often found that the dates do not coincide with the date inheritance recieved.  Recently a client of mine recieved inheritance in 2008 but the DWP sought to recover from 2004 with no valid grounds or credible evidence.

If your chance to appeal has expired have you tried putting in a new claim for IS? or HB?

Have you tried considering asking LA to waive recovery?

Does he still have access to the capital? Do not the diminishing capital rules only apply to notional capital?

Please correct me if I’m mistaken.

Edmund: there are two sets of diminishing capital rules.  For overpayment calc purposes, we are looking at actual capital that you still have.  The purpose of the calculation is to estimate how much of that capital you would have had to spend on rent if you had not received HB.  Then there is dimionishing noptional capital which applies to your ongoing HB award after the Council has decided that you deprived yourself of capital.  It’s a similar principle but it applies to current HB, not an overpayment for a past period.

MNM: any residual overpayment will be recoverable, it does not matter what the claimant knew or didn’t know because the overpayment was not caused by official error.

Thanks HB,

doesn’t the o/p need to be legally correct, if not correct, does that not make a portion of the o/p an official error?

Unfortunately client was referred out of time to us to lodge appeals - late appeals requested, and to date still no response from IS re late appeal or requests for information how O/P calculated (so far only HB heard by Tribunal last week).

However as the IS OP is £18000 approx, I suspect they haven’t, but client was also in receipt of Incap (+ now CB ESA SG) so only receiving approx £55.00- £60 wk IS. Therefore I think the deciding factor as to whether this would help client here, is whether the quarterly amount deducted includes all OP benefits ie IS + HB, CTB or is it just the I.S?

Thanks for your help, much appreciated.

Official error is about how the overpayment was caused, not how it was decided: in simple terms why the claimant was paid too much money in the first place.

Any fault in the decision making process - wrong calculation as in this case, inadequate decision notices - can sometimes abort the appeal and force the Council to start all over again with proper decisions but it is only delaying the inevitable if the decision was correct in substance.

In the O/Ps case, I think the correct position is that there is a recoverable overpayment which was caused by the Council not knowing about the claimant’s capital; however, the amount of that overpayment should have been calculated by reference to Reg 103.  This will reduce it by more than half I should think.  The claimant should apply for permission to appeal to the UT but the First-tier Tribunal must surely see straightaway that there has been an error.  They could send the Council away to start all over again, but I think that would be inefficient.  I think the ideal outcome is that the FtT reviews its decision, substitutes a fresh one to the effect that the o/p is recoverable but only as reduced by the diminution calculation, remit to the Council for that calculation to be made with liberty to restore to the Tribunal if there is any dispouite about the calculation.

watem - 01 August 2014 01:13 PM

Unfortunately client was referred out of time to us to lodge appeals - late appeals requested, and to date still no response from IS re late appeal or requests for information how O/P calculated (so far only HB heard by Tribunal last week).

However as the IS OP is £18000 approx, I suspect they haven’t, but client was also in receipt of Incap (+ now CB ESA SG) so only receiving approx £55.00- £60 wk IS. Therefore I think the deciding factor as to whether this would help client here, is whether the quarterly amount deducted includes all OP benefits ie IS + HB, CTB or is it just the I.S?

Thanks for your help, much appreciated.

For the IS overpayment, the capital is reduced by the amount of overpaid IS only each quarter, so they wouldn’t take account of any IB also received (as payment isn’t affected by capital obviously and therefore hasn’t been overpaid either).

I have seen cases where, once this calculation has been carried out correctly, the period of nil entitlement to IS has been significantly foreshortened once capital drops below £16,000 and tariff income then applies instead.

@HBAnorak, many thanks. CPAG 1238 indeed confirms.

Just clarification the client had no knowledge of the exact amount of his inheritence, it was actually about 65K received in approx 2003. Client received 20k, unaware family invested other 45k some sort of high ISA account. He lived on the 20k between 2003 - 2006 when he then re claimed all benefits. Therefore he could have accessed the money, had he known about it. There was no suggestion of fraud because his mental health problems accepted, and we actually have had SMI backdated to 2006 therefore taking care of the CTB op (approx 4k).

Still struggling with this one and dont fully understand why! Something just makes no sense. £18,314 IS OP IS, £26,259 HB OP and £3,933 CTB OP, therefore total of £48,507k to be repaid by client because he had £45k Capital?

IS, HB, and CTB claims suspended in 08/2012 when capital came to light, but HB+CTB OP recovery decision not issued 09/2013! (no idea why took so long yet).

Applying Reg 103 HB Regs - off setting HB received every 13 wks means his capital does not go below 16k until April 2013, therefore this is not going to help reduce the OP - as HB already stopped by this point.

Therefore client seems to have been disadvantaged more by delay in issuing OP notices, than Reg 103 not being applied. Some of the dates incorect in statement of reasons which I feel distracts from the delay, and not addressed at actual hearing.

Any further ideas/opinions/inspiration greatly appreciated - 2nd Tier clock ticking on deadline!

The diminution rules have to be applied seperately for each benefit, so unfortunately it is quite possible to get the result you have described. I don’t see how you could take this any further through the appeals process (for HB and CTB at least). However my understanding of the IS rules would be that the DWP have to demonstrate that the overpayment was caused by a failure to disclose. Did the tribunal address this? If all £48K remains outstanding I would suggest requesting a partial descretionary write off - maybe 20%-30% of each overpayment - to enable your client to repay the remainder.

Thanks for responding. Basis of appeal would have to be because Reg 103 was not considered by HB department or 1st Tier Tribunal. HB department seem to think diminution rules only apply to notional capital/expenditure. Not sure worth proceeding if not going to assist client though. Unfortunately client came to our attention late, and I think we are probably too late for IS appeal. Paperwork sketchy, but think IS probably issued recovery decision in 2012. We lodged late IS appeal request, but still no response DWP. I think it may have to be a descretionary request - but always the absolute last resort. Thanks again for replying.

If the HB O/P was £26,259 and the claimant held £45,000 capital throughout the overpayment period, then reg 103 is not going to make any difference, since the capital will never diminish to less than £16K. So it may have been an error for the tribunal to overlook reg 103, but it was probably not a material error that affected the outcome.

There seems to be some mixup between HB regs 103 and 50. Reg 103 is used to calculate an overpayment which occured through undeclared capital. Reg 50 is used where the claimant has deprived themselves of a capital asset. Its a fairly common misunderstanding.

There would be no provision to adjust the capital for living costs and rent etc - reg 103 only allows the capital to be diminished by the cumulative HB overpayment in 13-week increments (and only then for the purpose of calculating the overpayment). If the capital held actually changed significantly throughout the overpayment period that would need to be reflected in the calculation.

You said the claimant has been disadvantaged by the delay in calculating the overpayments - this is a very good point and you should mention it if you do request a discretionary write-off. If the O/Ps had been calculated in August 2012, your client could have used the £45K to repay the debts, and then continued to receive benefit once his capital reduced below £16K. However due to the delay, he has used his capital to pay his rent, and now has insufficient funds to repay the overpayments. So it would be very easy to show that your client has suffered financial loss as a result of the LA’s delay. Maybe something to take up through the complaints process?