Council not applying diminishing capital rules. What next?

Dee_Castle

Hi, I've recently been informed of an overpayment of my housing and council tax benefit. As this overpayment has been going on for over four years the sums are quite significant. But when my council has calculated the overpayment it hasn't applied the diminishing capital rules and so their calculation is nearly three times my calculation.

At the end of the letter it says:

"What to do if you disagree with this decision?

If you disagree with my decision, you can ask for a STATEMENT OF REASONS explaining my decision in more detail. You can also ask for an INTERNAL REVIEW, when another Council officer will look at my decision. Or you may choose to APPEAL and your case will be heard at an Independent Tribunal. ALL REQUESTS MUST BE MADE IN WRITING WITHIN ONE CALENDAR MONTH OF THE DATE OF THIS LETTER. You must make it clear what decision you dispute and why you do not agree with it. Requests received outside the time limit may be refused."

All I want is for the council to recalculate the sum correctly. What option should I take?

It's very annoying as they know that I've been on benefits due to my anxiety disorder and agoraphobia and it looks like they may try and force me to attend a tribunal just to correct their calculations. And surely THEY should be applying the diminishing capital rules, not me. I wonder how many other people they've demanded overpayments from in my situation have overpaid themselves?

dmg24

Hi Dee,

Welcome to MSE.

Try not to worry, hopefully you can get this sorted out without going to Tribunal.

First thing to do is ask for the statement of reasons. Once you have this, you can put together a letter detailing why you feel that this is incorrect, and then ask for the internal review.

I know how upsetting things like this can be in your situation (I'm the same), makes you more anxious than ever. My best advice is to take it step by step, and hopefully it will get sorted sooner rather than later.

If you need any more advice once you have the statement of reasons, there are plenty of people on here who can help you with the technicalities of it all.

Best of luck x

Dee_Castle

Thank for your warm welcome. Yes, I need to look at this objectively and take it one step at a time. But you know how it is when you receive these letters. :eek:

I'm not sure it's a statement of reasons I need as I know the reason why they have overpaid, I had an undeclared bank account. Would a statement of reasons just tell me the same?

It's just the amount of overpayment I'm disputing.

Thanks again.

daff_duck

Hi, Whatever you do if you know you are right don't give up. I had an overpayment of over £3,000 that they said I owed because of capital. Took 6 months but proved my point in the end and ended up paying back less than £300. My hubby would have just paid up with no questions but this is a big difference in what they said I owed and what I really did owe. I suspect a lot have people have just paid up because they do not understand how the system works. I didn't go to tribunal either I just delt with the council themselves.

dmg24

I would still get the statement of reasons, just to double check that it is for the reason you think. Also, I find that when it comes to writing to them, it is helpful to have their reasoning to refer to, particularly when I am having a 'jumbled up' day.

Sometimes, just in them writing down their reasons, they realise that they have made a mistake, and will amend it straightaway. I've just had that happen, admittedly it has taken them six months, but they got there eventually!

In terms of more technical advice, hopefully CIS will be along soon, who is an expert in this area.

simone83

LA will not use reduced capital figure unless they are provided with proof of that reduced figure - Have you supplied them with you full capital details for the overpayment peiord? also ask if they have applied 'underlying entitlement' for the overpayment period. this is knocking off the amount of benefit you would have been entitled to had they done it at the time.

but, if your capital was correct at the overpayment period time and has now reduced they will not alter it back to that time as if has only reduced since then.

LA's are given bonuses from government based on the % of overpayments repaid - do as long as you offer to rapay the amount they should come to a reasonable arrangment.

Dee_Castle

Hi Simone, I'm not sure I understand what you're saying. Are you still talking about diminishing capital rules? Here's what I found on the net:

"Diminishing notional capital is, as it's name suggests, something that eventually goes away. And if you ever look at these convoluted rules, you'll wish they would go away too!

Suffice it say that the DNC rules provide a compensating mechanism which stops notional capital being counted against a claimant twice. The core concept is that you have to reduce the notional capital by all the benefit the claimant has lost that week thanks to the operation of the notional capital rule in the HB/CTB scheme or any other state welfare scheme.

We think R.43A/35 says the notional capital should carry on diminishing at a flat rate (or not at a lower rate) over subsequent benefit periods - but the rules are a masterpiece of impenetrability."

Dee_Castle

Ah, a look at the DWP Housing Benefit site states that:

"The diminishing capital rule

3.59 This is the same principle as above, but applied retrospectively and used only for the calculation of an overpayment. The claimant’s capital is reduced by the benefit “lost” in the subsequent reassessment.

3.60 The major difference is that this rule is used where the claimant did not declare all the capital they own, and so uses actual capital owned by the claimant.

3.61 The LA must treat the capital as having been reduced by the benefit overpaid during the first 13 weeks, and each subsequent period of 13 weeks, for the purpose of calculating the total amount of benefit overpaid.

3.62 The overpayment is calculated in this way because, had benefit been assessed correctly in the first instance, it is likely that their capital will have reduced to meet their day-to-day living costs."

Ross01

How diminishing capital works is as follows: If you are claiming Housing and Council Tax benefit and dont declare all your savings, you will obviously
be overpaid. However when calculating the overpayment the LA must reduce the total capital used in calculating the overpayment by the amount you would have spent on rent if benefit had not been paid. Please not the capital is only updated every 13 weeks.

Eg Total undelared capital 18 thousand. Weekly benefit £85.00. Period of overpayment 52 weeks. Weeks 1 -13 Capital used is 18'000, Weeks 13 - 26 capital used is £16'895 (reduced by £85 benefit x 13 weeks or 1105), Weeks 26- 39 total capital used is 15790 (16895 - 1105) and so on.

Over 16 thousand you do not qualify for benefits, below 16 thousand an income tarrif is applied. Therefore in this example if your income was very low and you only didnt qualify due to having over 16K in capital, out of a total overpayment of £4420, only £2210 would be recoverable (the first 26 weeks)

However diminishing capital would only usually be applied if the overpayment is so large, and your captial so small that if you had not claimed you would have legitimately qualified during the overpayment period.

.In our example if the overpaid period had only been 25 weeks then the council would not bother with the diminishing capital as it would have had no effect.

If you are sure that the overpayment is definately due to failing to declare capital (or the LA using the wrong capital) write to the LA Appeals team within one month of the decision and ask them to either carry out a diminshing capital assessment or for a statement of reasons explaining why
diminshing capital is not applicable. Take the letter in person, and get a receipt confirming that you have asked about diminsihing capital. Do not rely on Royal Mail.

PS. Next time read your award letter to ensure that the capital used is 100% correct.

The Inland revenue have records of the interest / tax paid on uk bank accounts, and will eventually inform the LA, when things do not match so always declare all capital.

Dee_Castle

Thanks for your advice. I'm currently recalculating their overpayment figure using a spreadsheet and am applying what you have said.

As for the income tariff you describe I read somewhere that this was for savings higher than £3,000. I've also seen the £6,000 figure somewhere too and I believe that at some point the value was raised. Have you any idea when this was? My overpayment dates back over 5 years.

Anyway, thanks for your help. I really appreciate all the advice here and it's helping calm my nerves a little.

Ross01

Yes the lower threshold was raised from £3 to £6 thousand from April 2006, so unfortunately the lower threshold applies for any period of overpayment before April 06. Once you go over £6000 (formerly 3K) every £250.00 or part there of in capital which you own count as £1.00 a week in income. So if you have £6501 pounds that counts as 3 pound a week in income.

If you are a pensioner then the Tarrif is £1.00 for every £500 in capital