Loan or Capital

Hi everyone, I have a client who was on UC with an autistic child in need of a placement in a special school as they were no longer unable to continue main stream schooling.
Our Local Council delayed finding a place for the child in a special school and was becoming unreasonably months of delay. So the parent found an independent school specifically for disabled children, fees per term £3,000. She remortgaged her house for £40,000 for the whole duration of her child’s remaining time in this school, over 4 years.
She now has an overpayment of UC due to capital in excess of £16,000, which I initially have argued on the grounds that it is a loan that has to be immediately repaid so should be treated as a loan rather than capital, plus she has renounced that she will benefit from the loan as it is for the sole use of the school fees, as the Council were denying the child’s right to an education.

We have now registered the appeal and so looking for any similar cases and/or thoughts from you fellow benefit advisors.

Thank you in advance

Melanie

Sorry but I don’t see the argument. Your client re-mortgaged the property and has clearly done so with an intention to spend the funds in a particular way, but that doesn’t mean that she is legally required to use the funds in that way. There are often cases where somebody has set aside money to pay a future tax bill or funeral costs or similar and it is capital all the same. It would perhaps be different if there was some legal restriction on the use of the funds e.g. if they had been paid over by a charity for the specific purpose of meeting the school fees or if they had been awarded to the son as damages and therefore needed to be used in specific way for his benefit.

You have said that the funds are “a loan that has to be immediately repaid” but they aren’t. The mortgage will need to be paid back in contractual instalments over time. In fact, it is very likely that repaying the sum immediately would result in an early repayment penalty. You’ve also referred to the notion of having relinquished funds. I think you have drawn this from the CPAG book - it seems to be based on an optimistic reading of R(IS)1/90 which deals with the circumstances in which a person can be taken to have implicitly given away the beneficial ownership of their funds - the basic point being that this would be extremely rare.

I think that your client would have been in a better position if they had taken out the money in instalments or paid off the whole 5 years fee at once (if that is even possible). Then you would have been dealing with a question of deprivation and you might have been able to argue it was reasonable and not directed towards a benefit advantage. The problem that you have is that the money is still sitting in their bank account so these questions don’t arise.