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Disregarded Capital/Notional Capital
Hi,
I have a client who is 72 and the appointee to her 51 year old son. Her son has schizophrenia and ASD.
Son is currently receiving DLA and ESA Contribution-based. Mother reports her son saving up his DLA for the passed 20 years and currently has an amount in savings of over £20k+. At this time, her son is using these savings to pay a very expensive private rent.
Although the mother has been made aware that these savings will be counted as capital for any housing assistance, she wants to know if she would be able to invest her sons £20k in a property for her son to live in (therefore an equitable interest in owner occupancy) and then put together a written agreement for her son to pay her rent. Would her son then be eligible to apply for a top-up of Universal Credit housing element via his ESA contribution-based income-related benefit?
Would this equity in the property be disregarded or would it be counted as notional capital?
This isn’t really a capital issue but an issue of eligibility for HB/UC HCE.
Mum will presumably be purchasing the property in her own name but on trust for herself and her son as beneficial owners. The rental liability between the son and mother would then fall within para 7, sch 2 of the UC Regs which is an absolute exclusion to the HCE.
For HB purposes, this would fall within reg 9(1)(e) of the HB Regs which is a bar to HB entitlement unless either the LA or FtT can be persuaded that the arrangement “was not intended to be a means of taking advantage of the housing benefit scheme” (note the reversed burden of proof). The LA might well take a point on non-commerciality as well.
So for this to work, we would have to be able to ensure that he fell within the HB scheme rather than the UC scheme and then we would also have to persuade the LA that the arrangement was not intended to take advantage of the scheme.
He will only be able to make a new claim to HB if he falls within the SDP exception. It would then be a matter of getting his ESA re-assessed to include the SDP (which would have to wait until he his capital had been reduced) and then claiming HB and hoping the LA gave it the thumbs up. They would then have to hope that nothing happened to naturally migrate them to UC as this would scupper the whole arrangement.
It may well be that the view is taken that this is all not worth the risk.
This isn’t really a capital issue but an issue of eligibility for HB/UC HCE.
Mum will presumably be purchasing the property in her own name but on trust for herself and her son as beneficial owners. The rental liability between the son and mother would then fall within para 7, sch 2 of the UC Regs which is an absolute exclusion to the HCE.
For HB purposes, this would fall within reg 9(1)(e) of the HB Regs which is a bar to HB entitlement unless either the LA or FtT can be persuaded that the arrangement “was not intended to be a means of taking advantage of the housing benefit scheme” (note the reversed burden of proof). The LA might well take a point on non-commerciality as well.
So for this to work, we would have to be able to ensure that he fell within the HB scheme rather than the UC scheme and then we would also have to persuade the LA that the arrangement was not intended to take advantage of the scheme.
He will only be able to make a new claim to HB if he falls within the SDP exception. It would then be a matter of getting his ESA re-assessed to include the SDP (which would have to wait until he his capital had been reduced) and then claiming HB and hoping the LA gave it the thumbs up. They would then have to hope that nothing happened to naturally migrate them to UC as this would scupper the whole arrangement.
It may well be that the view is taken that this is all not worth the risk.
Thank you for your detailed reply! Much appreciated.
If the son were to be reassessed for Income-based ESA and therefore given SDP, would the spending of the savings (£20K) be seen as notional capital and therefore a deprivation of assets?
If the son were to be reassessed for Income-based ESA and therefore given SDP, would the spending of the savings (£20K) be seen as notional capital and therefore a deprivation of assets?
It’s possible that this would be investigated and conceptually it could be treated as a deprivation - getting rid of one form of capital and replacing it with another which happens to be disregarded can still be a deprivation - but it wouldn’t be the thing I would be most worried about as DWP tend not to treat expenses incurred for “good reasons” such as buying homes and paying off debt to be deprivations.
However, yes I would add it to the growing pile of risks involved in the manoeuvre.