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Earnings / Deductions under UC

Abi Sheridan
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Universal Credit Support - Citizens Advice North & West Gloucestershire

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Joined: 26 April 2019

Hi All,

I’ve got a client who’s employer has put some money through on the earnings part of her payslip, then immediately deducted it on the same payslip as she isnt actually entitled to that money. The employer is saying they cant change their system just for her.
As UC only ignores tax, NI, and pension, but includes basically all earnings, this money is being seen as earnings for the purposes of calculating her UC. Instead of her actual earnings of £1200-odd, she is seen as having earnt £3000.
Technically, the RTI feed is correct, as they are getting the same information as cl has on her payslip. What needs challenging, I believe, is the fact that “earnings” that are immediately then deducted are not ignored for UC.

(Side note, I helped another cl claim UC last week who pays into a monthly saving scheme for xmas. Essentially, £50 is deducted off her earnings then paid to her at the end of the year. This £50 therefore goes through her payslip twice and is deducted once. UC, however, would not ignore the deduction and would actually count her as having earned this twice. I managed to advice her to stop doing this before she claim UC so it hasnt actually impacted her, but seemed an unfair way to calculate it!)

I’m taking to tribunal, but want some legal arguments to use other than “this cant be right?!”

Anything you guys can think of to help me out would be greatly appreciated.

Elliot Kent
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Shelter

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What is this money?

Abi Sheridan
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Universal Credit Support - Citizens Advice North & West Gloucestershire

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Total Posts: 13

Joined: 26 April 2019

Two types:
1. Holiday pay. Cl had actually already been paid the holiday pay in monthly instalments whilst she was on mat leave, but they put it all through as one lump sump in July, then deducted it as she had been paid it.
2. Cl was on a phased return to work post mat leave, so instead of working her 17 contracted hours a week, she only worked 8. On her payslips, they paid her for 17, then deducted 9 hours of pay.

Timothy Seaside
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Housing services - Arun District Council

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I’ve got a similar one where a client was working until November 2018, then claimed UC. In March 2019 his employer issued a payslip to balance their own books which shows an amount of pay set off against pay already received. UC treated the amount of pay as his income so he didn’t get any UC that month (even though he didn’t receive any pay at all). We’ve raised it as an RTI dispute in the first instance - arguing that they should be using a zero figure in place of the RTI figure. Currently waiting for a decision (although these are only supposed to take 14 days).

In terms of a legal argument (if it comes to it) I think we’ll argue that the treatment and definition of earned income in Chapter 2 of the UC Regs requires them to aggregate the earnings on the payslip before making allowable deductions. Reg 54 says that it is based on the “actual amounts received”. The process of aggregation should include offsetting positive and negative earnings - so it’s not really a deduction at all . By the time the aggregation is complete, there is nothing to deduct in my client’s case.

[ Edited: 19 Nov 2019 at 11:06 am by Timothy Seaside ]
Charles
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Accountant, Haffner Hoff Ltd, Manchester

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Abi Sheridan - 18 November 2019 12:36 PM

Hi All,

I’ve got a client who’s employer has put some money through on the earnings part of her payslip, then immediately deducted it on the same payslip as she isnt actually entitled to that money. The employer is saying they cant change their system just for her.
As UC only ignores tax, NI, and pension, but includes basically all earnings, this money is being seen as earnings for the purposes of calculating her UC. Instead of her actual earnings of £1200-odd, she is seen as having earnt £3000.
Technically, the RTI feed is correct, as they are getting the same information as cl has on her payslip. What needs challenging, I believe, is the fact that “earnings” that are immediately then deducted are not ignored for UC.

The RTI feed does not contain the same information as the payslip. For example, this sort of deduction is not (and cannot be) included in the submission.

If the employer (and their payroll software) submits the FPS correctly, this problem wouldn’t happen. Basically, the employer is supposed to submit a ‘taxable pay’ figure, which in this case is the £1200 figure.

(Side note, I helped another cl claim UC last week who pays into a monthly saving scheme for xmas. Essentially, £50 is deducted off her earnings then paid to her at the end of the year. This £50 therefore goes through her payslip twice and is deducted once. UC, however, would not ignore the deduction and would actually count her as having earned this twice. I managed to advice her to stop doing this before she claim UC so it hasnt actually impacted her, but seemed an unfair way to calculate it!)

Again, if the employer does this correctly, no error would occur. The £50 should only be included in ‘taxable pay’ once.

The issue then is getting DWP to change the figures after an employer has made such a mistake. That seems to be very difficult, unfortunately.

[ Edited: 20 Nov 2019 at 12:30 pm by Charles ]