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ESA - DEPRIVATION OF CAPITAL
Deprivation can occur in circumstances where a person converts capital from a form in which it is taken into account to another where it is disregarded - e.g. using an inheritance or redundancy payment to purchase an annuity.
Deprivation can occur in circumstances where a person converts capital from a form in which it is taken into account to another where it is disregarded - e.g. using an inheritance or redundancy payment to purchase an annuity.
But that is a product and you no longer hold the capital.
If you’ve converted cash to property you still hold the capital although liquidity is affected.
The operative purpose is to secure your right of occupancy above any other (except for the crown.)
But that is a product and you no longer hold the capital.
It has a capital (surrender) value.
Actually, John, let’s take a step back because the example I gave wasn’t the best.
I am not entirely confident it can be as straightforward as being able to say “I still hold the capital.” Take this example…..
I own my house outright. I receive an inheritance of £35k. I decide to spend that capital on a loft conversion to provide an extra bedroom and additional bathroom. Depending on where I live and the local housing market, it may well be that the increase in the market value of my property actually exceeds the £35k I spent on the conversion, even though I have clearly parted with £35k when paying the architect and builder. But I am not certain that the argument that I still possess the capital and so have not deprived myself of it would succeed.
What, also, of the scenario where due to negative equity, the sum required to redeem the mortgage exceeds the market value of the property? Would there not be ‘deprivation’?
And in R(SB) 40/85 it was confirmed that what is in issue is the question of the deprivation of a specific asset or resource, rather than my assets or resources in general; it makes no odds that if by parting with particular asset A I have acquired another of equal or greater value in B - I have still deprived myself of asset A.
But that is a product and you no longer hold the capital.
It has a capital (surrender) value.
In that case you no longer have capital but have exchanged said capital for an investment.
Therefore the nature of the capital has changed and become something else which as you say has a value that may be calculated in some way as to a cash alternative as the capital is not in your possession. You certainly can’t live in it, touch it or pass it on. The capital is only available to you upon divestment.
Capital is an ordinary word and includes cash and property.
Land and houses fall into property without much argument. As does cash.
I’m still struggling to see where the deprivation comes in?
To further strengthen the argument its an IO mortgage with a run out date where the debt has to be redeemed.
I presume there is no vehicle for repayment of the debt in full (or even part.)
The current ‘welf’ logic seems to be that the debt must be serviced until the scheduled end date.
And then what?
Actually, John, let’s take a step back because the example I gave wasn’t the best.
I am not entirely confident it can be as straightforward as being able to say “I still hold the capital.” Take this example…..
I own my house outright. I receive an inheritance of £35k. I decide to spend that capital on a loft conversion to provide an extra bedroom and additional bathroom. Depending on where I live and the local housing market, it may well be that the increase in the market value of my property actually exceeds the £35k I spent on the conversion, even though I have clearly parted with £35k when paying the architect and builder. But I am not certain that the argument that I still possess the capital and so have not deprived myself of it would succeed.
What, also, of the scenario where due to negative equity, the sum required to redeem the mortgage exceeds the market value of the property? Would there not be ‘deprivation’?
And in R(SB) 40/85 it was confirmed that what is in issue is the question of the deprivation of a specific asset or resource, rather than my assets or resources in general; it makes no odds that if by parting with particular asset A I have acquired another of equal or greater value in B - I have still deprived myself of asset A.
That’s an entirely different argument.
You’ve paid for services and materials.
Also as for R(SB) 40/85 https://www.rightsnet.org.uk/pdfs/rsb/40_85.pdf
The regs in force at that time and considered were resources - I’d say that is different argument to capital.
The approach in R(SB) 40/85 has been confirmed in decisions subsequently. It is still cited as the correct approach in the commentary to the current Social Security Legislation volumes, the authors of which are judges in the UT, so we can assume they know something about it. The decision makes clear that what is in issue is the deprivation (or disposal) of a specific asset rather than the totality of a person’s assets, so that the focus moves to the purpose behind the deprivation. In other words, an argument that a person’s total capital comprising assets A,B and C was worth £200k and that they now have assets A and B worth £210k after disposing of asset C will not suffice. They no longer have asset C - they have deprived themselves of it.
Applying that to the case in the opening post, the claimant currently has whatever is the value of the shared ownership property, plus £125,000 inheritance. If she uses some or all of the £125,000 to buy outright ownership of the property she will have deprived herself of that sum, regardless of whatever is the value of the property she now owns outright. That is the way it works.
I am not saying the point is in no way arguable (I might try arguing it myself in circumstances where the deed was already done and a deliberate deprivation decision already made) - but we should not be giving the impression to the o/p that his client can use the £125k to purchase an increased share of the property without there being any risk of a deliberate deprivation decision…...
TI am not saying the point is in no way arguable (I might try arguing it myself in circumstances where the deed was already done and a deliberate deprivation decision already made) - but we should not be giving the impression to the o/p that his client can use the £125k to purchase an increased share of the property without there being any risk of a deliberate deprivation decision…...
Exactly, and the important thing, as noted above, is what the significant operative purpose is of spending the money in whichever way it is eventually spent (if it is spent).
I’ve seen more than one capital decision in my time where the DM has accepted that a house purchase was not deprivation of income.
It would be wrong to tell anyone there is only one possible outcome or even how to proceed. The risk is entirely the claimants.
In the case of the OP the money is sufficient to deny benefit in any case so putting it into the property would not seem to be an unreasonable approach.
What I would say is that the decision relied upon is so unlike the circumstances described in the OP as it’s of no help.
Resources are very different to capital - Resources were both income and capital combined into ‘resources.’
http://www.legislation.gov.uk/uksi/1981/1527/pdfs/uksi_19811527_en.pdf
The current legislation has capital and income as separate concepts.
The ratio of the case has to be deduced from its facts - these are reasons the court gave for reaching its decision based on material facts. The ratio of a case is binding on inferior courts, by precedent.
The claimant was made redundant on 6 April 1984, claimed and was awarded unemployment benefit (NI based?)
Then claimed supplementary benefit (income, sorry resource based) 10 July 1984.
As he had received over £8,000 in redundancy payments, had spent some of this on a holiday, expenditure on furniture, furnishings and home improvement.
19 July The bank statement showed a credit of £2,004 after a £1 ,500 withdrawn on 17 July 1984.
The claimant had at the date of the SB claim resources exceeding £3 ,000 and a supplementary allowance was not then payable to him.
As it’s so materially different to the matter under consideration (the OP) and the commissioner was considering resources - i.e. (reg 3 - resources include capital and income) then there is reason not to rely wholly on this as ‘good’ law.
On the flip side the commissioner did indeed make the finding below at para 9.-
Thus if a claimant uses cash to purchase, say, saving certificates, he does not reduce the value of his overall resources at all, and it could not be suggested that he had deprived himself of the cash for the purposes of securing, or increasing the amount of, supplementary benefit.
He therefore still has the value of the saving included in the calculation of his resources.
In the current terms he would be turning his capital into capital and there is no deprivation issue as the capital is still part of the claimants capital. It’s just treated differently.
To pursue the current logic then any payment made on a mortgage (save for those specified) would be deprivation whether £100, £1000, £10,000 or £100,000+.
Is it shared ownership or shared equity?
Hi Gareth
Thanks for this - apologies for the lengthy delay but have been off sick. It’s shared ownership not equity.
Best
I’ve seen more than one capital decision in my time where the DM has accepted that a house purchase was not deprivation of income.
It would be wrong to tell anyone there is only one possible outcome or even how to proceed. The risk is entirely the claimants.
In the case of the OP the money is sufficient to deny benefit in any case so putting it into the property would not seem to be an unreasonable approach.
What I would say is that the decision relied upon is so unlike the circumstances described in the OP as it’s of no help.
Resources are very different to capital - Resources were both income and capital combined into ‘resources.’
http://www.legislation.gov.uk/uksi/1981/1527/pdfs/uksi_19811527_en.pdf
The current legislation has capital and income as separate concepts.
The ratio of the case has to be deduced from its facts - these are reasons the court gave for reaching its decision based on material facts. The ratio of a case is binding on inferior courts, by precedent.
The claimant was made redundant on 6 April 1984, claimed and was awarded unemployment benefit (NI based?)
Then claimed supplementary benefit (income, sorry resource based) 10 July 1984.
As he had received over £8,000 in redundancy payments, had spent some of this on a holiday, expenditure on furniture, furnishings and home improvement.
19 July The bank statement showed a credit of £2,004 after a £1 ,500 withdrawn on 17 July 1984.
The claimant had at the date of the SB claim resources exceeding £3 ,000 and a supplementary allowance was not then payable to him.As it’s so materially different to the matter under consideration (the OP) and the commissioner was considering resources - i.e. (reg 3 - resources include capital and income) then there is reason not to rely wholly on this as ‘good’ law.
On the flip side the commissioner did indeed make the finding below at para 9.-
Thus if a claimant uses cash to purchase, say, saving certificates, he does not reduce the value of his overall resources at all, and it could not be suggested that he had deprived himself of the cash for the purposes of securing, or increasing the amount of, supplementary benefit.
He therefore still has the value of the saving included in the calculation of his resources.
In the current terms he would be turning his capital into capital and there is no deprivation issue as the capital is still part of the claimants capital. It’s just treated differently.
To pursue the current logic then any payment made on a mortgage (save for those specified) would be deprivation whether £100, £1000, £10,000 or £100,000+.
Thanks to you and others for all this detailed input - I have been off sick since just after the posting so only just catching up. I’m going to re-examine in light of arguments raised and will post again.
But when you do examine, bear in mind he’s wrong. Really. I will return to this in more detail, but don’t have time right now.
A few more reasons to support the argument.
1. Shared Ownership property - If Housing Benefit was in payment for the rent (the other share of ownership) then benefit entitlement is reduced.
2. Actual Capital cannot be also be Notional Capital - If one converts cash to Real (Royal) Estate aka property then double counting would come in to play. Hence in the counter argument if one moved out of the property one would have both Actual Capital (value of former home) and the Notional Capital.
and my appointment turns up 40 mins late -
TBC
Not sure if that’s a rebuttal or an agreement?
In case I haven’t made myself clear - the argument is that there can be no deprivation where you still have the capital - the matter is solely that that said capital now falls to be disregarded.
John, as others have mentioned, I really don’t think you can sustain that position given R(SB)40/85- see the commentary at page 452 of Sweet and Maxwell Volume 2 current edition.