Transitional element and benefit cap

HI
we havent yet gone to a MM area and im just trying to read as much as I can around TP/TE and erosion. currently, MM applies to TC only claimants, so im assuming that anyone moving to UC under MM will not be benefit capped at the point of move. I have read a couple of different explanations as to what will happen at the time of MM so would like to clarify my understanding as I may be muddling things.

1. total legacy benefits - no cap - is the cap applied when calculating (so as to reduce total legacy bens down before any further steps? or is this only reduced on indicative amount?;

2. indicative UC amount - cap will definitely be applied here  

If it is only reduced on indicative amount, the claimant will be worse off - does this then mean that the loss is added as a TE?

looking forward to when more claimants move across (say TC and HB) If someone is only capped by a small amount on legacy benefits (eg only entitled to £20 HB so that is all that can be taken, even though may be £80 above the cap) is only the cap amount that currently applies to legacy benefit applied? and then full cap is applied to indicative UC so they will also be worse off - again, is this made up by TE?

ive read one example where the ben cap was only applied to indicative UC and then another where it was applied on both legacy and indicative so just trying to get things clear in my mind.

Hope this makes sense

The first point to realise is that the benefit cap anyway applies to the eventual UC award after the addition of any transitional element. As such, even if a transitional element was ‘created’ (or increased) due to the “indicative UC amount” calculation being benefit capped, that still wouldn’t lead to higher entitlement in practice.

However, the TP Regs do also include specific provision to reduce the “total legacy amount” where it exceeds the benefit cap level. See Reg 53(11).

In practice, because the benefit cap is anyway applied to the eventual UC award as above, the only effect of this extra application of the benefit cap is where a claimant later becomes exempt from the cap, or where overall benefit entitlement later reduces below the cap level. If not for Reg 53(11), the transitional element would have then increased the UC award, but now it won’t.

So, effectively, in a standard case, there are two reasons why a claimant won’t be protected in a case where they weren’t capped on tax credits: firstly because of the application of the cap to the eventual UC award, and secondly because of Reg 53(11).

Where the benefit cap has been applied to HB, but HB entitlement wasn’t high enough to implement the cap in full, Reg 53(11) still applies to reduce the “total legacy amount”, and the benefit cap will also apply to the eventual UC award as well.

As an aside, I would say that Reg 53(11) is one of the worst drafted provisions I have ever seen, with numerous issues.

Thank you - so in laymans terms If a person is subject to the ben cap on legacy benefits (or should be) regardless of what is currently applied, the full application of the cap to legacy, will reduce down comparative legacy bens to £1835 (outside London) and as the cap is applied in the same way to indicative UC - there is no TE anyway?

I was looking at the example of Angie in WR bulletin which did not have legacy reduced down by cap (which is what confused me) but I now realise that Angie was exempt from the cap on legacy as she was in receipt of WTC and so was exempt. In this situation then, it seems that the cap is not applied to legacy but is applied to UC and so she would have a TE but the effects of this would be cancelled out by the cap?

If she later became exempt from the cap, im guessing that the TE would then work for her ?

so sorry for all the questions. I do have a situation which is quite complex (we arent MM yet) -
a lady with 6 children (4 pre 2017) who is in receipt of WTC/CTC and has been exempt from cap. She doesnt get HB. She has been treated as in remunerative work whilst off due to sickness, but this will end shortly - so she will be subject to cap if she moves to UC. she has applied for PIP (which has been refused and we are doing M recon) - just trying to work through all the permutations and want to get things right. 

I haven’t checked up the Angie case, but:

1) if she has earnings of over 16 hrs at NMW, then the benefit cap would not be applied to the indicative UC amount either.

2) due to the way Reg 53(11) is drafted, in a case where the claimant was on WTC, but earning less than 16 hrs at NMW, then the total legacy amount will be reduced despite the WTC entitlement. Therefore they will not get a transitional element to be used when they later become exempt from the cap.

So, in your case of the lady with 6 children, point 2) above will apply, unfortunately.