When the new right to reside test came in on 1/5/04 there was tranistional protection, so your clients didn't lose their IS. However, the transitional protection is lost if there is a break in claim for any reason. Therefore when they came back from abroad they were caught by the new rules and lost their IS.
However, they must have lost entitlement to all income based benefits to lose their transitional protection. The transitional protection is in Reg 6 of the Social Security (Habitual residence) Regulations 2004 SI 1232/2004. This provides that transitional protection continues as long as there is entitlement to a "specified benefit" - IS, HB, CTB, or PC.
If they claimed HB/CTB for the period they were away, or if they can now make a backdated claim for HB/CTB that ties up to their old awards, then they should retain the transitional protection for all specified benefits. Transitional protection is only lost when entitlement to all specified benefits ceases.
If there has been continuous HB/CTB, or if you can now do a backdated claim, you should be able to reinstate IS.
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