Client who is on Income Support sells his old business premises and uses the proceeds to pay off outstanding debts, including mortgage on own home. He had been advised that his IS was likely to stop if he did this under notional capital rules but then it didn't. He had intended to get by on just the Child Tax Credit.
In the event although he kept them informed he continued to receive IS. They have now written to him, 4 months later, making enquiries with a view to making a decision on notional capital. Since he did not expect to carry on getting benefit this could not have been a significant operative purpose in his decision to pay off the debts. Does this mean he can avoid being caught by the notional capital rules and continue to get benefit?

Yes..... R(SB)9/91 holds that a positive intention to obtain benefit as a result of the deprivation must be shown.

Also:

There is a decision that "a man must pay his debts" (R(SB)12/91). However, the issue there was whether there was a "certain and immediate liability" to repay the debt (if there was that sort of liability then the capital is not regarded as being possessed by the claimant in the first place). I don't think the mortgage carries that sort of liability (unless perhaps the claimant was in arrears and the bank demanding the full amount??).