notional capital problem

i have a client who was on ESA for several years and got HB. she came into about £30-40K and cancelled her HB claim. approx 2 years later when she was down to £5K she reapplied for Hb but was refused as they decided to treat her as still having the capital as she is unable to provide receipts for how it was spent - new furniture and redecoration of the house, which was very shabby after living for years on benefits, helping her daughter through college, helping provide for her granddaughter, laptops, new clothing,  paying full rent and c tax etc

i reapplied and put forward an argument that had she tried to have spent the money purposely to obtain or increase entitlement to HB, she would have likely reapplied for HB as soon as she was below the £16K, limit, but she didnt she waited until she only had £5K and then gave up when her claim was refused, only reapplying at my suggestion, which doesn’t (to me) suggest someone trying to ‘play’ the system

HB still keep banging on about needing receipts, but i have countered that she doesn’t have them and even if she were able to provide a receipt for every penny spent, that wouldn’t prove or disprove the intent behind her spending. they refused my revision request and i’ve now asked for it to be sent for appeal

in the meantime my client is going to really struggle to pay the rent until the appeal is heard which from recent experience may be up to 12 months. i’m concerned that the landlord may apply for repossession before the appeal is heard

is there anything else i can do? the HB office seem to have given up on it and are happy for it to go to appeal instead of discussing the claim any further

many thanks, johnny

Has the LA produced the appeal bundle and sent it to Tribunals Service yet? If so. contact TS and request expedited hearing. If not, ask the LA to expedite the appeal and if they refuse, contact TS direct and ask them to issue direction to LA to that effect.

I agree with you- I don’t think the expenditure is excessive over a 2 year period and it doesn’t suggest to me that there is any evidence suggesting deprivation.

Evidence that will assist include bank statements showing outgoing expenditure (inconclusive as doesn’t prove where it went but circumstantial nevertheless), council tax and rent records and for some items, guarantees if she still has them.

CIS/515/2006 may be of some use, re assessment of capital, eg

She is under no legal duty to keep receipts, or accounts, for past years or at all. She can be asked to produce the records she has, and she can be expected to keep the sort of records reasonable people in her position actually keep. (Were she under a specific duty, as with value added tax, the answer would be different). And she can be asked if she can explain any large and unusual payments out. But to demand actual receipts for all expenditures, however small, over a ten year period is not reasonable, and places the practical burden of proof not only on her rather than the Secretary of State but also places it far too high. She is fully entitled to ask that general conclusions be drawn from her oral evidence and from the actual amounts she holds in all her assets at any particular time, and from time to time.

Has she re-applied for ESA or any other means-tested benefits that would passport her to HB/CTB irrespective of the LA’s deprivation decision?

I haven’t done a notional capital case for years but I was always terrible at predicting the outcomes.  Those I thought had a great case would invariably lose and vice versa.  The substantive merits seem strong in your client’s case (which you might not want to hear from me).  But regardless, there may be a legal argument or two that you could deploy.  Warning: I’ve not had the chance to test these.

The first is based on the wording of the law which is always that the person will be treated as possessing capital which he has deprived himself of for the purpose of “securing or increasing” entitlement.  It’s well established that the SSWP/LA must prove that the claimant had knowledge of the capital limits.  In my experience that is not always difficult for them to demonstrate: eg, leaflet INF4 re Income Support contains details of the limit.  And other benefits have equivalent leaflets (I’m not really familiar with the HB one).  I often found that once the SSWP had shown that such a leaflet/notes had been issued the tribunal would find the claimant was on notice of the limit.

But looking back now that doesn’t seem enough to prove the case against the claimant.  Eg, I have 30k.  So I spend 25k and then claim IS.  A tribunal finds that I know the capital limit so have deprived myself of 25k.  In that situation, there is a strong case for saying that I have only deprived myself of £14k (ie the difference between 30k-16k) rather than 25k.  Why? Because once my capital is £15999 my entitlement to benefit is likely (though it depends on other income I might have) to always be “secure” for the purposes of the above test.  Ok, I’d have substantial tariff income but my entitlement would still be secure (the ordinary meaning of secure is to seek to obtain or to safeguard).

Of course the draftsman anticipated the above problem.  That’s why the deprivation test is also one of “increasing” entitlement.  In the above example, I can only as a matter of objective fact deprive myself of the capital between 16k and 6k (ie 10k) for the purpose of “increasing” my entitlement.  And for that I think the SSWP/LA would need to show that I had some understanding of the tariff income rules or at least some understanding of the incremental relationship between an increase of capital between 6k and 16k and the corresponding reduction in the amount of benefit received.  The INF 4 does not include this info – well, the last time I looked it didn’t.  The notes to the clerical IS claim form do provide the following:

“for example, we do not count

…savings of £6,000 or less. But if you have savings between £6,000.01 and £16,000, a deduction of £1 a week is made from your benefit for every £250, or part of £250, above £6,000”

But I’m not sure about the info you’re sent after making a telephone claim.  I’d be surprised if the above instruction was in the contact centre’s script.  And I’m not sure if HB/CTB have equivalent instruction/notes.  And if you did not complete your own clerical claim, eg an advice worker did it on your behalf which you signed, you’d have a better chance of arguing that, despite receiving the clerical claim form notes, you didn’t read them.  And what if you came into money years after first claiming.  Could you really be expected to have retained a copy of the original clerical claim’s notes?  The IS uprating letters only included INF4 and 1 I recall.

Of course, if you’ve had tariff income in a previous claim, you might well be found to still be “on notice” of the tariff income rules. 

But still, it’s an argument to use where a tribunal rejects your reasons for spending the money.

And the argument is stronger still where you have deprived yourself of all your capital.  Say, above, I’d not even retained 5k of my capital.  All the notes suggest that any capital below 6k doesn’t count.  Even the IS claim form and I think the standard HB form only ask if your capital was more than 5.5k in the last 6 months, for example, which suggests less than 5.5k is not important.  A claimant who has, say, 9k capital could be forgiven for thinking that depriving himself of upto 6k would not affect his benefit when of course it would.  There is no lower capital limit.  The claimant is not to know that the 3k between 9k and 6k is not ring-fenced for the tariff income rules.  If he spends 6k, his actual capital would be 3k and he’d have questions to answer about the 6k spent.  The notes/claim forms don’t make that clear.  In fact they suggest the opposite.

The 2nd argument is more technical (it’s a legal argument after all:)).  It’s the “but/for” argument.  Imagine I spend 25k of my 30k as above but it comes out at tribunal that I was once a Welf and could be expected to know about tariff income.  In that situation, I can arguably only deprive myself of a further 2k for the purpose of increasing entitlement.  That’s because I’d already deprived myself of 14k for the purpose of “securing” my entitlement (see above).  Once I spend another 2k, any further deprivation cannot be for the purpose of increasing my entitlement.  Why? Because at that point I’d have a total notional capital of 16K (ie 14k + 2k) and I would not be entitled to IS.  So I couldn’t increase my entitlement to something I wasn’t entitled to.  Nor could I deprive myself for the purpose of “securing” entitlement because that entitlement was already secure after I’d spent 14k.  So the remainder of deprived capital, ie the 9k between 14k-5k would appear to disappear into the benefits ether.  In other words, I could have deprived myself of more than 2k “but for” the fact I’d already deprived myself of 14k.

Good old fashioned legal arguments (which I’ve not tested).

splendid, thanks for your replies.

she is in recipt of income related ESA and had no problem claiming that after the capital was reduced, which i did inform HB of.

she has showed bank statements (i’m fairly sure) to show the money isnt held in account anymore and how it was reduced over time

joy of joys. HB agreed to look at their decision again before sending to an appeal after i asked them to expedite the case through the appeal service, and have relented and agreed to pay her claim

why couldnt they see sense in the first place? however, i shalln’t be to concerned on that for now as just happy that her rent will be paid at last

many thanks for your help

I would hope so too. 

If your client was on a qualifying benefit (irESA)  the HB office cannot refuse her claim for HB on the grounds of capital.