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Transitional Element for Tax Credit-only claimants
Hello everyone
We’ve been looking at how the Transitional Element would be calculated for Tax Credit-only claimants and asked the DWP to clarify our understanding based on the Guidance because it seemed counterintuitive / not how we’d originally expected it to operate. After a fair amount of pushing we have got our answer –
“Currently, as we calculate the indicative amount for UC, we only factor in elements of UC that are present within the existing legacy benefit claimants, therefore unclaimed housing costs, or carers allowance are not taken into account for the indicative UC. However, they will be included within the first Assessment Period if the claimant declares housing costs and/or caring responsibilities.”
So ‘currently’ Tax Credit-only claimants won’t have the Housing Costs Element or Carer Element included in their Indicative UC Amount even if they are liable to pay rent and/or are getting Carers Allowance.
The DWP stressed in their email that they’re still developing their approach but it’s hard to see how this could change in the future.
This leads to some funny situations including where some people get a Transitional Element even though they are better off on UC without it. And where someone who would be better off on UC anyway (paying rent but no HB) could be even better off if they wait for a Migration Notice and get a Transitional Element.
What is the guidance you are quoting from?
I don’t think that it is accurate, unless I am going badly wrong somewhere. The transitional element is calculated by looking at the ‘total legacy amount’ which is based off actual legacy receipts against the ‘indicative UC entitlement’ which is the approximate UC receipts. If the client rents a property but does not currently get HB, then the HCE would still be included in their ‘indicative UC entitlement’ which would mean that someone in this situation is very unlikely to get any transitional element.
I’ve heard this too. It sounds too good to be true. I think it is to facilitate assessment by machine at an early stage using just the HMRC data feed. By the time it gets to real life UC calculation at the end of AP1, the transitional element is already fixed from the preliminary calc using HMRC figures.
Someone from Housing Systems might be along to post the link to the guidance: they have done a lot of careful research into this.
Oh ... the OP is from Housing Systems!
is this a situation where DWP should use reg 54(7) of the Transitional Provisions Regs ?
(7) The calculation of the indicative UC amount is to be based on the information that is used for the purposes of calculating the total legacy amount, supplemented as necessary by such further information or evidence as the Secretary of State requires.
Or am I going badly wrong too?
And this on a day where I read DWP boasting about ‘streamlining and simplifying the benefits system’....
The fact they are still developing their approach speaks volumes. As I have said elsewhere, they have had years to resolve all this. Years. Why are they still mucking about?
What is the guidance you are quoting from?
I assume this will be the “Calculating the transitional protection top-up payment” guidance, which can be found here:
https://www.whatdotheyknow.com/request/884371/response/2141305/attach/5/Calculating%20the%20transitional%20protection%20top%20up%20payment%20V10.0.pdf?cookie_passthrough=1
The guidance certainly does suggest that housing costs are only considered when a claimant has an existing HB award, and as is stated in the response the OP got from the DWP.
As Peter says, it is probably because they want the process to be as automated as possible.
This also fits with what is also stated in the guidance that DWP will be simply taking over the other household income figure from tax credits as unearned income, when calculating the indicative UC amount, and won’t make their own independent calculation of unearned income, as they should really be doing.
The Carer’s Allowance one is interesting, because it appears they will include it as unearned income for the indicative UC amount, so why not include the Carer Element as well in the indicative UC amount?
Charles has basically covered it!
After learning about how they were treating income we realised that they may not be supplementing the info from HMRC as much as we thought so we looked back at that guidance on how the TE is calculated and saw that they didn’t input housing costs if there was no HB or mark the claimant as a carer if they weren’t on HB/IS/IR-ESA/IB-JSA. Obviously, it seems odd that they wouldn’t include the HCE or Carer Element (especially if they’re deducting CA) so we asked the DWP engagement team and after a lot of pushing and waiting the quote in my original post is from the head of strategic briefing in the Move to UC team. She had to discuss it with the policy team, and they took a while to get back to us suggesting it wasn’t something they’d really thought about.
The approach of just using info from legacy benefits tracks with a very early example of a TE that we saw in the discovery phase where a man on IR-ESA who was responsible for a child but hadn’t claimed Child Tax Credit didn’t appear to have a Child Element included in his Indicative UC Amount. Not sure if anyone else has seen examples of TEs where the info used to calculate it would need to be supplemented with info from the UC claim?
I actually put in an FOI which should be responded to very soon (hopefully today) asking for more guidance on how they calculate the TE so that may give us a bit more clarity if they respond with anything useful - https://www.whatdotheyknow.com/request/calculating_transitional_element#incoming-2368866
This isn’t actually consistent with the legislation though right? I am not just going mad?
This isn’t actually consistent with the legislation though right? I am not just going mad?
I stand with Elliot!
What is going on???
Surely the legislation allows the SoS to collect additional evidence and adjust the figures accordingly?
Is DWP saying ‘Why should we do it, let the claimant sort it out’ - ????????
This isn’t actually consistent with the legislation though right? I am not just going mad?
I think it technically is in that the Regs don’t require them to supplement the information - unless you argue that it’s definitely necessary for them to look at rent / caring when doing the calculation.
As far as we can see, it makes claimants better off - lower indicative uc amount means higher Transitional Element. It seems like, as Peter said, they’re prioritising ease (or not thinking of the possibility that someone might pay housing costs but not get HB?)
This is all extremely useful! I had been racking my brain trying to understand how the TP for my client was so high,
Luckily CPAG helped with the calcs, and it came out that not including the Housing Cost in the indicative amount made the amount my client got make sense.
However, I have realised UC aren’t taking into account that my client gets a benefit that needs to be taken into account as unearned income. If they did use this when calculating my clients indicative amount this would mean that the TP would go up even more.
Is the way they are calculating this, fixed for the moment - would me asking them to redo the indicative amount with this benefit included, potentially mean they might redo this calc with the housing cost element included instead?
The approach of just using info from legacy benefits tracks with a very early example of a TE that we saw in the discovery phase where a man on IR-ESA who was responsible for a child but hadn’t claimed Child Tax Credit didn’t appear to have a Child Element included in his Indicative UC Amount. Not sure if anyone else has seen examples of TEs where the info used to calculate it would need to be supplemented with info from the UC claim?
For this type of case, I could see a potential argument that Reg 54(2)(a) implies that if there is no award of CTC, no Child Element should be included.
I don’t agree with that interpretation, but I can see the argument for it!
Interestingly, in the original draft managed migration regs, they also included an assumption that housing costs are equal to the Appropriate Maximum Housing Benefit for the claimant’s HB claim. But this was taken out from the final version of the regs.
This isn’t actually consistent with the legislation though right? I am not just going mad?
I think it technically is in that the Regs don’t require them to supplement the information - unless you argue that it’s definitely necessary for them to look at rent / caring when doing the calculation.
As far as we can see, it makes claimants better off - lower indicative uc amount means higher Transitional Element. It seems like, as Peter said, they’re prioritising ease (or not thinking of the possibility that someone might pay housing costs but not get HB?)
I agree that claimants will be better off, but I do agree with Elliot that the Regs require DWP to look at the client’s full circumstances. Reg 54(7) (read with Reg 54(1)) will apply, because it is “necessary” to supplement the information in these circumstances.
This is all extremely useful! I had been racking my brain trying to understand how the TP for my client was so high,
Luckily CPAG helped with the calcs, and it came out that not including the Housing Cost in the indicative amount made the amount my client got make sense.
However, I have realised UC aren’t taking into account that my client gets a benefit that needs to be taken into account as unearned income. If they did use this when calculating my clients indicative amount this would mean that the TP would go up even more.
Is the way they are calculating this, fixed for the moment - would me asking them to redo the indicative amount with this benefit included, potentially mean they might redo this calc with the housing cost element included instead?
What is the income they didn’t include?
[ Edited: 17 Aug 2023 at 11:28 am by Charles ]I am not going to object if the DWP want to adopt a system which is more generous than the one provided for in the regulations, I would just like to be clear that this is what they are doing - it’s rather difficult to advise people if the law isn’t being followed and they’re just working off arbitrary guidance hidden behind FOI requests.
Whilst it may be more generous to claimants now, we can all of course foresee the next ‘retrospective verification’ exercise where the DWP turn up and assert that there have been a bunch of recoverable overpayments once their computer systems catch up.
What is the income they didn’t include?
IIDB. Which I only noticed as they currently aren’t taking this into account within the “unearned” income.
Then when trying to work out the amount of TE that they got, it only was making sense without Housing Costs in the indicative amount and without taking IIDB as unearned income.
However was it not included due to it not being taken into account in Tax Credits?
I am not going to object if the DWP want to adopt a system which is more generous than the one provided for in the regulations, I would just like to be clear that this is what they are doing - it’s rather difficult to advise people if the law isn’t being followed and they’re just working off arbitrary guidance hidden behind FOI requests.
Whilst it may be more generous to claimants now, we can all of course foresee the next ‘retrospective verification’ exercise where the DWP turn up and assert that there have been a bunch of recoverable overpayments once their computer systems catch up.
Completely agree.
There are also cases where it is not more generous. One example would be someone has started receiving some pension income in the middle of the tax year. The indicative UC amount will be calculated using the ‘other household income’ figure from tax credits, which will be low, due to the income only starting in the middle of the year, meaning the indicative UC amount will be higher than it should be, and the claimant is therefore worse off.
IIDB. Which I only noticed as they currently aren’t taking this into account within the “unearned” income.
Then when trying to work out the amount of TE that they got, it only was making sense without Housing Costs in the indicative amount and without taking IIDB as unearned income.However was it not included due to it not being taken into account in Tax Credits?
I don’t think this will be the reason. The guidance states that DWP benefits are not taken from tax credits, but are supposed to be entered in the TP calculator independently. See section 2 of the document I linked to above (the third and fourth bullet points, and sections 2.10/2.11).
See also the note just before Step 5 of the following document, which also confirms that HMRC do not even send over details of benefit income which DOES count as income for tax credits: https://www.whatdotheyknow.com/request/956227/response/2278483/attach/4/220517%20Move%20to%20UC%20ETS%20How%20to%20collate%20Transitional%20Protection%20data%20v0.4%20Policy.pdf?cookie_passthrough=1
Coming back to your original question, I suppose there is a chance that if you ask them to recalculate it then perhaps they will include the housing element in the indicative UC amount. It’s a difficult one!
What are the relative figures? I.e., what was the gain from not including the housing element, and what was the loss from not including the IIDP?
I agree with Charles and Elliott about what reg 54 requires - it’s supposed to be the UC the client would be entitled to on migration day, subject to the assumptions in para (2).
My worry now is will DWP use reg 62(1) to later say we made a mistake & overpaid you by undercalculating indicative UC? Despite the title of that reg, I think it isn’t just about retrospective changes to legacy benefits.
So I am with Elliott in worrying about overpayments coming to light later.