GOV PENSION WOMENS REFUND

iow74

My wife recently received her under-paid pension from the DWP --  As we are in receipt of help toward housing and council tax our local council have indicated they will claim the refund back as it is classed as income not capital -- but to add insult to injury she will also be liable for income tax on top --- on this web site there is an indication that a lump sum from DWP will not affect these benefits as long as " the underpayment was as a result of  [ an official error ] or [ an error on point of law ] but I can't find the official ruling on GOV.UK. I have tried a number of help places but so far nothing definitive.
It would appear that we will end up being worse off by getting the refund once the tax situation happens -- I contacted the DWP but they were not helpful referred me back to local authority.
Any definitive answer gratefully accepted

calcotti

I tried looking for guidance on this the other day and couldn't find anything either. 

iow74

this is a what I found on Martin Lewis site but I can't find the definitive GOV.UK site

calcotti

These rules relate to capital disregards. You say that your council are arguing that the payments should be treated as income. That doesn't seem to make sense to me.

The quoted rules are the general rules for capital but I can't find confirmation of whether these payments are being classified as official error - clearly they logically should be.

You could try going back to council saying 'as these are benefits arrears surely they fall to be treated as capital and as they result from official error the payments should be disregarded for twelve months/indefinitely (as applicable).'

iow74

The council stance appears to be that as the under payment is related to state pension which is classed as income -- had the correct pension been paid at the time  they would have adjusted downward any benefit paid --  When I mentioned the possibility of classing it as capital the supervisor who was apparently asked said  " no it's income "   However this was all done recently on the telephone and I have posted the DWP to them for their decision.
I have learnt elsewhere that a parliamentary question raised in June seemed to indicate that tax would not be charged on any refund including interest--  on the documentation I received no interest was paid.
There is also no mention  in the DWP refund documentation of " error "  However an under payment by the DWP to thousands of women clearly is .

NedS

calcotti said:

These rules relate to capital disregards. You say that your council are arguing that the payments should be treated as income. That doesn't seem to make sense to me.

They also relate to back payment of benefits, hence treated as capital not income. Does State Pension qualify as a benefit? It is taxable income so it's understandable that the council would argue to treat it as income.

calcotti

NedS said: Does State Pension qualify as a benefit? It is taxable income so it's understandable that the council would argue to treat it as income.

I think that goes to the heart of the question. The fact it is taxable is not a deciding factor. New style JSA/ESA and Carer’s Allowance are all taxable and are clearly benefits. State Pension is include in the ‘welfare’ budget when discussing Government spending. My opinion is that it is a benefit but perhaps government are trying to argue differently. Given the scale of the issue it would be helpful if they provided specific guidance.

There was a recent thread in which someone had lost local authority Social Care funding as a result of the arrears.

Dazed_and_C0nfused

I have learnt elsewhere that a parliamentary question raised in June seemed to indicate that tax would not be charged on any refund 

I think you must have misunderstood that. 

There is a parliamentary question from June 2020 and the response makes it clear that, when due, tax will be charged.  Albeit only for a limited number of years.


Income tax is calculated on arrears of state pension for the tax year in which the pensioner was entitled to receive it, and not in the year in which a lump sum is paid.

Where arrears of state pension are paid, income tax will only be due on any income that exceeds the personal allowance for the respective tax year.

In addition, HM Revenue and Customs will only collect income tax for the current tax year and the four preceding tax years for arrears payments made due to DWP error. Any arrears of state pension relating to earlier years will not be subject to income tax.

https://questions-statements.parliament.uk/written-questions/detail/2020-06-26/65108

calcotti

Thanks for posting that, Dazed_and_Confused.

Dazed_and_C0nfused

I think is going to be a regular subject on here over the next few months 

iow74

Yes thank you for the clarification --Dazed and Confused--  Still means once the council  decides to relieve my wife of her Pension refund --she is still stuck with an additional 5 years tax -- on a refund she will get no  " benefit " from !!  Happy days