GOV PENSION WOMENS REFUND

Robbie64

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.

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).'

The rules for disregarding arrears of benefits for 52 weeks / indefinitely are covered in DMG Chapter 29. See DMG 29495 and DMG 29511. Arrears of Retirement Pension are not included in the list of benefits that can be disregarded (nor indeed are any other NI related benefits such as JSA / ESA (contributions based), it is largely means tested benefits and non-contributory benefits such as AA, DLA, PIP but Carer's Allowance is not included).

The following is my own interpretation of the rules re: RP arrears

The question then is are arrears of any NI benefit to be treated as capital or income. My understanding is that in the first instance they should be treated as income and offset against any means tested benefit that was payable at that time, whether than be IS, ESA, JSA, HB, CTB / CTS. I'm not sure about Pension Credit but I have a feeling this may also be included - the amount of each of those benefits that would have been payable at the time would have been smaller (it's basically offsetting). For DWP benefits the SWP can simply check internal records to see if any amounts need to be witheld. For HB and CTB / CTS then the DWP cannot do this, the Local Authority will need to check LA payment records.

If any part of the lump sum remains after the above then that will be treated as capital but with no period of disregard.

As I posted above, that is my interpretation of the rules and it basically matches the position of the council.

kaMelo

I think the question NedS raised and Calcotti commented on is the important one.

calcotti said:

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.

The answer is far from clear but looking at the evidence;

State pensions were around long before the welfare state was created. The state pension is unlike benefits in that it is neither means tested nor universal, your entitlement is directly related to your historical contributions.
State pensions are taxable in the same way as income and only because the law says pensioners don't pay NI means the state pension is not subject to NI. If this law was removed then state pensions would be treated like income and subject to NI. 
If the state pension was a benefit, means tested or universal, then there would be no need for a separate benefit top up such as pension credit.

Funding for pensions does come from the welfare budget however the link is more historical in that along with the NHS and benefits, funding for all these came from national insurance contributions.

Only a court could clarify but on balance the evidence would suggest the state pension is an income rather than a benefit which, in this situation is unfortunate.

iow74

I am at a loss what to do next --the council decision will inevitably be to treat my wife's refund as income - the Inland Revenue will demand 5 years tax leaving us out of pocket -- I wonder if there is any provision for her to hand back the refund --thereby the council can't take it and the Inland Revenue have nothing to tax -- leaving my wife and I exactly as we  were previously -- I suspect not !!--- as there are upwards of 200000 women involved in this it would be fair to assume a large percentage are in receipt of some form of benefit and may be similarly trapped --  I f I were a cynic -- I might think the government were aware they could possibly profit from a refund !!

Pollycat

Is this something that MPs would take on and ask questions about?

iow74

Yes--- I intend to once I have the final decision form the council-  at least my MP could highlight a potential vote loser from several thousand disgruntled ladies.

calcotti

kaMelo said:

State pensions were around long before the welfare state was created. 
...
If the state pension was a benefit, means tested or universal, then there would be no need for a separate benefit top up such as pension credit.

While that is true I think we need to look at enabling legislation.
So for example The State Pension regulations 2015 are headed Social Security and are made" in exercise of the powers conferred by sections 55A(6) and 175(4) of the Social Security Contributions and Benefits Act 1992 etc."
See https://www.legislation.gov.uk/uksi/2015/173/introduction
This rather suggests, to me, that the State Pension is a Social Security benefit.

Different benefits serve different purposes. New style JSA or ESA are clearly benefits but can be topped up with UC.

However that doesn't leave me any the wiser as to how these payments should be treated.

NedS

iow74 said:

I am at a loss what to do next --the council decision will inevitably be to treat my wife's refund as income - the Inland Revenue will demand 5 years tax leaving us out of pocket -- I wonder if there is any provision for her to hand back the refund --thereby the council can't take it and the Inland Revenue have nothing to tax -- leaving my wife and I exactly as we  were previously -- I suspect not !!--- as there are upwards of 200000 women involved in this it would be fair to assume a large percentage are in receipt of some form of benefit and may be similarly trapped --  I f I were a cynic -- I might think the government were aware they could possibly profit from a refund !!

Surely you misunderstand? I would assume that any refund due will firstly be taxed appropriately, leaving your wife with a refund of net income (after tax) which the benefits system / local authority can then take into consideration with respect to any overpayment. I see no way you can end up worse off by having the refund as that would be a nonsense. Admittedly you may have little left after due tax is paid and any overpayments of benefit are repaid depending on circumstances.

calcotti

NedS said: I would assume that any refund due will firstly be taxed appropriately, leaving your wife with a refund of net income (after tax) 

Interesting to see how this is dealt with. For this to work DWP would have to work out the arrears due for each year, inform HMRC who then need to match it to HMRC records for each claimant, calculate the tax due for each of the years on which tax liability may be considered, inform DWP and then DWP would make a net payment. This would be a complete departure from normal practice. DWP never, as far as I know, deduct tax from taxable benefits. HMRC collect any tax due by adjusting tax codes on other sources of income and/or through self assessment.

Dazed_and_C0nfused

calcotti said:

NedS said: I would assume that any refund due will firstly be taxed appropriately, leaving your wife with a refund of net income (after tax) 

Interesting to see how this is dealt with. For this to work DWP would have to work out the arrears due for each year, inform HMRC who then need to match it to HMRC records for each claimant, calculate the tax due for each of the years on which tax liability may be considered, inform DWP and then DWP would make a net payment. This would be a complete departure from normal practice. DWP never, as far as I know, deduct tax from taxable benefits. HMRC collect any tax due by adjusting tax codes on other sources of income and/or through self assessment.

There has been no suggestion I'm aware of that DWP will be deducting tax at source.

Something like that would probably take months to implement and need new legislation so would be hugely unpopular with the majority of people involved as if will just add delay to DWP being able to make refunds to those affected.

Given the op refers to Inland Revenue and also the benefit claims involved I wonder if his wife is actually going to be liable to tax or if he has just assumed this?

Either way I cannot see HMRC requiring completion of a Self Assesment return to collect any tax owed in this type of scenario (unless it means someone meets one of the normal Self Assessment criteria), it would be collected by an adjustment to a tax code or by the Simple Assessment procedure.

calcotti

Dazed_and_C0nfused said: There has been no suggestion I'm aware of that DWP will be deducting tax at source.

Agreed, which is why I said it

calcotti said: ..would be a complete departure from normal practice.