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Benefit arrears and deprivation of capital

Ianb
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Macmillan benefits team, Citizens Advice Bristol

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When a claimant receives benefit arrears subject to a disregard are they required to provide any explanation of what has happened to the capital during the disregard period. I realise that they should disclose any remaining capital if it it takes them over the capital limit but not clear if they could be quizzed about expenditure and deprivation capital rules applied.

Logically the arrears should be treated as not existing until the disregard expires and therefore the client should be able to do what they want with it during that period. To apply deprivation of capital rules would make the disregard valueless. However I can’t see anything to make this clear.

Elliot Kent
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If you have £50k in your bank all of which is disregarded and you arbitrarily give it to your friend, you could perhaps be said to have deprived yourself of that capital. What then is the consequence of depriving yourself of it? You would be treated as though you still have it (reg 50 UC Regs etc). But if you are treated as still having it, the disregard still applies, so there is no impact on your entitlement.

I suppose there is a scenario where someone has sat on their money until the last minute and then gives it all away so as to avoid the adverse benefit consequences of the disregard ceasing to apply. If someone has done that, then they could be fixed with capital which is disregarded at that point in time they deprive themselves of it, but which later falls into consideration. But I don’t see that there is any objection to the principle of the deprivation rules being applied to a case like that.

I don’t think that claimants are routinely asked to justify what has happened to their capital unless it has disappeared unusually quickly. There is no real reason for the DWP to take much of an interest in what happens to backdated payments they had made. The claimant has a year to spend the money and whilst these payments are often several thousand, they are rarely at a level that a person couldn’t realistically spend in a year.  The issue is more likely to arise when the funds have been mixed in with other capital sources which aren’t disregarded.

Others may have different experiences.

[ Edited: 28 Jul 2022 at 08:30 am by Elliot Kent ]
Ianb
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Macmillan benefits team, Citizens Advice Bristol

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Thanks Elliot.

Some people may of course get larger arrears payments which are not covered by official error so still subject to 12 month disregard.

I note that once UC migration is complete (I know that’s still a way away) it appears that all new arrears be limited to 12 months regardless of amounts or cause of arrears but I interpret it to mean that those with a longer disregard arising from a legacy benefit put in place prior to the completion of Managed Migration will retain the longer disregard.

[ Edited: 29 Jul 2022 at 06:56 am by Ianb ]