Deprivation of capital on UC question?

blackstar

Hello all

We have a question in relation to deprivation of capital in Universal Credits.

We owe my mother about £7,000 for money she paid to me to repair things in our new home that we bought that had urgent repairs over the last 1 year. We are currently in the first year of capital protection of UC since switching from TC. 

I know that the UC regulations state 

The Universal Credit Regulations 2013

(2) A person is NOT to be treated as depriving themselves of capital if the person disposes of it for the purposes of—

(a)reducing or paying a debt owed by the person; or

(b)purchasing goods or services if the expenditure was reasonable in the circumstances of the person's case.

‘Reasonable’ only applies to purchases. Paying off a debt is always fine, whether reasonable or not. (For UC at least.)

It’s quite clear the legal position is that if you are reducing or paying a debt owed then you cannot be depriving yourself of your capital. “Reasonableness” only enters into it if you’re talking about purchasing a good or service. Therefore all we need need to do is show the DWP  that we owed the money that we will repay. Whether we could do so via installments is not relevant.

Is this correct and does it matter if its to a company or to my mother?

What proof do you think the DWP would need to see?
Ie a letter from my mother? 
I can provide the transactions from the sums of money from my mother going into our account and also the receipts from the repair work that was done very easily. 

Also we need to get some more repair work done but need to know what we will need to provide the DWP with? Ie receipts ofcourse? The builder I am not sure if he just does this for extra money outside of his work so would I need to e sure he is VAT registered and paying his 20% and it's all done on the books.

I have asked him if he can give me an invoice or a receipt but not heard back yet. Would it be better to ask for an invoice before he starts the job with the quote on it, just incase he does the work and then I pay him and he doesn't give me a receipt or any paper work? And then I won't have a receipt to give to Universal credits just the transaction of payment from my account to his?

I did read:

"Yes, you should absolutely get a receipt when getting a building work completed. A receipt serves as proof of payment and provides a record of the work done, which can be helpful for future reference, warranty claims, or potential disputes. Additionally, it can be used for tax purposes."

TimeLord1

You would only need to prove the payment was borrowed for repairs and to be paid back. It is best to have it documented if they queried the sum being moved from one account to another. So anything you can put together if questions arise will clear it up.

• Reasonableness:
  Purchasing goods or services, or paying a debt, are not considered deprivation of capital if the expenditure was reasonable. 

blackstar

How can I prove the payment by my mother was paid to us for repairs? A letter from her? 

Does.it also need to be proved the payemt from her to me was specifically for repairs (it was) out of interest? It is debt regardless and it doesn't say that any debt you are repaying has to be debt from paying for goods or services that is considered reasonable? 

NedS

blackstar said:

How can I prove the payment by my mother was paid to us for repairs? A letter from her? 

Does.it also need to be proved the payemt from her to me was specifically for repairs (it was) out of interest? It is debt regardless and it doesn't say that any debt you are repaying has to be debt from paying for goods or services that is considered reasonable? 

It's not really relevant what the loan was for - assuming it's a genuine loan/debt, you can repay it without depriving yourself of capital. The issue for you is proving there is a genuine debt, and you are not now just giving away capital to receive more UC.

If it is a genuine debt, you would have entered into an agreement with her when she loaned you the money, maybe detailing how and when it was to be repaid. Was such an agreement ever documented?

If not, maybe you can show through bank statements the receipt of the money from your mother, and then transactions for the repairs to your house for which the borrowed money was used, which would at least help substantiate your position.

TimeLord1

Copy of her statement to your bank, amount, dates, bills receipts vat etc paid to merchants builders. You could've done a payment duplicate receipt book loan for amount from to etc. Evidence of work carried out photos.  But just sending money to someone else's bank and having no evidence for it or purpose will probably seem suspicious activity especially if they ask for months of statements.

TELLIT01

NedS said:

If it is a genuine debt, you would have entered into an agreement with her when she loaned you the money, maybe detailing how and when it was to be repaid. Was such an agreement ever documented?

If not, maybe you can show through bank statements the receipt of the money from your mother, and then transactions for the repairs to your house for which the borrowed money was used, which would at least help substantiate your position.

If I had borrowed money from, or lent money to, a family member, neither they nor I would even consider drawing up a formal agreement between us.  It would be done entirely on trust.

huckster

As Ned says, if this is ever questioned, you would just show evidence of money from your Mum, it being spent on repairs to house and you paying it back. Bank statements,  transactions/receipts would suffice.

TimeLord1

But if you should consider covering your back if claiming from the state or taxes, then it would make sense to have a basic legal agreement, family or not.

peteuk

blackstar said:

Hello all

We have a question in relation to deprivation of capital in Universal Credits.

We owe my mother about £7,000 for money she paid to me to repair things in our new home that we bought that had urgent repairs over the last 1 year. We are currently in the first year of capital protection of UC since switching from TC. 

What capital do you have?  standard TP is one year, unless there a specific reason for a longer disregard.

born_again

If she lent you £7K then you would have a credit in your bank account & a debit on hers & payments going out to the companies for their services. Making it a lot easier to prove.

Or is this a case of she has paid for the repairs on your behalf from her own account. Which would make things a lot harder to prove.

blackstar

Thanks for the helpful replies.

Yes there was no formal written agreement with my Mum and myself on how and when to pay back  just to pay it back. 
Got lots of evidence though on the repairs ie the exact amount of money coming from my Mums account into our account and then that exact amount of money going to the eletrical repair company etc. And invoices from the electrical repair company for that exact amount. 

The only thing that worries me is the below

Later decisions — Jones v SoS [2003] EWCA Civ 964 & [2015] AACR 39 — have re-confirmed that each case must be considered on its own merits and no hard or fast rules can be applied to re-payment of debts. So even if a person pays off a debt which is not ‘immediately repayable’ that does not necessarily mean that they have deprived themselves of capital.

R(SB)12/91 establishes the principle that if a person has debts which are ‘immediately repayable’ then the deliberate deprivation rule cannot apply — “A person has to pay his debts. He has no choice in the matter and if he has no choice, then any divesting of capital resources in pursuance of the reduction or discharge of his indebtedness cannot be for the purpose of securing supplementary benefit or any increase thereof.” The Judge stressed, however, that this principle only applied to debts which were capable of enforcement in the courts. It would also not apply to debts which were not immediately repayable, such as the usual mortgage situation where interest and capital repayments were kept up, so if a person paid these prematurely then it would still be necessary to look at whether this was done for the purpose of securing entitlement to benefit.

https://medium.com/adviser/deprivation-of-capital-1d6ee2a67a04

So basically that above means that if you pay off more on a mortgage or more on a debt to family that has no court sanctions and you benefit financially ie via UC then the paying off of a genuine debt can still be considered deprivation of capital.????

That's really worrying if true