Universal credit: refusing legacy = deprivation of capital?

Newcad

Paying off debts is not DoC for Universal Credit.

However "Intentionally" creating debts to deliberately avoid DoC is a different matter.

As I said above INTENTION is all important.

I'm pretty sure what the DWPs view on that would be.

If you disagree then go ahead and see what a Tribunal rules when the DWP says that it's deprivation.

peteuk

Grumpy_chap said:

peteuk said:

Im trying to avoid 40% tax but will pay it the following year, and heres why.  HMRC want to apply 40% to everythin I earn, as my pension take up my tax free allowance.  I will owe £300.00 ish in tax because Im just the wrong side of the 40% threshold. This is due to additional pay thats not included in my basic salary. 

Maybe I have read this incorrectly but, the way that would normally work for tax codes where pension takes the personal allowance (£12.5k) is that the tax code given to the employer would tax everything at 20% unless the 40% threshold (£50,270) has been exceeded by total of pension plus salary.  If that is not what is happening, HMRC may have incorrect data and the tax code may require amending.

On paper my wage and pension is less than the £50K threshold. So therefore I have the whole of my tax free allowance on my pension and so my wage is currently at 20%. 

When it comes to April, they work out my full pay and because of an henancement paid monthly (included in my yearly salerary) I end up owing the tax man £300.  Which I pay.   But then they I have to call them to sort out my tax code again.   They wanted to apply the 40% to my wage....

On paper the tax code is correct, but retrospectively I earn more than £50, 270

Grumpy_chap

peteuk said:

On paper my wage and pension is less than the £50K threshold. So therefore I have the whole of my tax free allowance on my pension and so my wage is currently at 20%. 

When it comes to April, they work out my full pay and because of an henancement paid monthly (included in my yearly salerary) I end up owing the tax man £300.  Which I pay.   But then they I have to call them to sort out my tax code again.   They wanted to apply the 40% to my wage....

On paper the tax code is correct, but retrospectively I earn more than £50, 270

That is still not clear / not what should happen with tax codes.

You have a pension that uses your tax free allowance £12.5k.
You then have salary that takes you to just under the £50k threshold.
You receive an "enhancement" (is that like a bonus?) that lands in April. 
The PAYE system sees the April payment and projects forward at the same level for the year so put the total into the 40% bracket.  That would still be the first £37.5k of taxable income at 20% and only the amount above at 40%.
As the year progresses and the "enhancement" does not land again, the PAYE system will see that reducing and bring the tax collected down by a bit each subsequent month so that the end of year tax collected is very close to the correct figure.

Muttleythefrog

Newcad said:

Paying off debts is not DoC for Universal Credit.

However "Intentionally" creating debts to deliberately avoid DoC is a different matter.

As I said above INTENTION is all important.

I'm pretty sure what the DWPs view on that would be.

If you disagree then go ahead and see what a Tribunal rules when the DWP says that it's deprivation.

I rather suspect you'd be right... otherwise DoC becomes a nonsense.... people could simply manufacture a debt (including with a friend never mind a company) and pay it off with any excess monies. Motivation would surely be looked at regardless of the fact paying off a debt cannot typically be considered DoC and order of events may be important (especially since people on UC may struggle to create debts due to affordability). If there ever was to be case law to the contrary then I imagine the law would simply be tightened surrounding manufacturing a debt (such as by buying lots of TV sets from a buy now pay later vender or booking holidays for the next 10 summers) to leave decision makers or tribunals having to consider whether the debt was legitimate and made sense to the claimant to acquire/accrue...i.e.. consider purely whether the spending/debt creation was legitimate/made sense for the claimant regardless of how it would be paid for (bring forward the consideration of deprivation to arrive at notional capital as a step to always consider prior to repayment).  Lack of specific case law for UC where the 'paying off debt is never considered DoC' may suggest it'll rarely be tested in the ways suggested.

HillStreetBlues

Muttleythefrog said:

Newcad said:

Paying off debts is not DoC for Universal Credit.

However "Intentionally" creating debts to deliberately avoid DoC is a different matter.

As I said above INTENTION is all important.

I'm pretty sure what the DWPs view on that would be.

If you disagree then go ahead and see what a Tribunal rules when the DWP says that it's deprivation.

I rather suspect you'd be right... otherwise DoC becomes a nonsense.... people could simply manufacture a debt (including with a friend never mind a company) and pay it off with any excess monies. Motivation would surely be looked at regardless of the fact paying off a debt cannot typically be considered DoC. If there ever was to be case law to the contrary then I imagine the law would simply be tightened surrounding manufacturing a debt (such as by buying lots of TV sets from a buy now pay later vender or booking holidays for the next 10 summers) to leave decision makers or tribunals having to consider whether the debt was legitimate and made sense to the claimant to acquire/accrue.

With the current legislation there is nothing the DWP can do about it, it's a consequence of  the new repayment of debt is never DoC under UC.
With benefits  creating a debt for whatever reason could never be DoC as you can't deprive yourself of something you haven't got. But what could have been DoC is early repayment of that debt.
There a current thread on here about paying most of wages into pension clearly that person knows that doing so increases their UC, as that is allowed there is no DoC nothing to prevent this no matter what the DWP might think.
There will be a minority that take advantage on how legislation is written, sometimes they tighten those regs, others times they don't bother.  

EDIT corrected.

Muttleythefrog

HillStreetBlues said:

Muttleythefrog said:

Newcad said:

Paying off debts is not DoC for Universal Credit.

However "Intentionally" creating debts to deliberately avoid DoC is a different matter.

As I said above INTENTION is all important.

I'm pretty sure what the DWPs view on that would be.

If you disagree then go ahead and see what a Tribunal rules when the DWP says that it's deprivation.

I rather suspect you'd be right... otherwise DoC becomes a nonsense.... people could simply manufacture a debt (including with a friend never mind a company) and pay it off with any excess monies. Motivation would surely be looked at regardless of the fact paying off a debt cannot typically be considered DoC. If there ever was to be case law to the contrary then I imagine the law would simply be tightened surrounding manufacturing a debt (such as by buying lots of TV sets from a buy now pay later vender or booking holidays for the next 10 summers) to leave decision makers or tribunals having to consider whether the debt was legitimate and made sense to the claimant to acquire/accrue.

With the current legislation there is nothing the DWP can do about it, it's a consequence of  the new repayment of debt is never DoC under UC.
With benefits  creating a debt for whatever reason could never be DoC as you can't deprive yourself of something you haven't got. But what could have been DoC is early repayment of that debt.
There a current thread on here about paying most of wages into pension clearly that person knows that doing so increases their UC, as that is allowed there is no DoC no matter what the DWP might think.
There will be a minority that take advantage on how legislation is written, sometimes they tighten those regs, others times they don't bother.  

I'm not convinced.... not least because the concept of debt itself can be open to interpretation by a decision maker or court and so I tend to agree with Newcad that ultimately motivation, events (and their order) may be looked at and a different conclusion arise regardless of the issue of repayment of 'debt'. Absolutes (like "never") in legal interpretation I don't think particularly meaningful or helpful here and I rather suspect it could be tested... including what is a legitimate debt.... I mean if I say I owe you £100k before my inheritance is distributed and duly give you that after receipt of inheritance is that a debt repaid or a promise or gift or am I the vulnerable victim of a crime.. who knows... but I rather suspect eyes would be cast very carefully over such if detected and questions asked. Any gross abuse of rules I suspect would lead to changed law surrounding the qualification of 'legitimate debt' alongside motivation for creation of such in order to arrive at notional capital. But as we know courts... tribunals.. will be forever interpreting law, and creating case law, even if it is very clear or appears black and white.

HillStreetBlues

Muttleythefrog said:

I'm not convinced.... not least because the concept of debt itself can be open to interpretation by a decision maker or court and so I tend to agree with Newcad that ultimately motivation, events (and their order) may be looked at and a different conclusion arise regardless of the issue of repayment of debt. Absolutes (like "never") in legal interpretation I don't think particularly meaningful or helpful here and I rather suspect it could be tested... including what is a legitimate debt.... I mean if I say I owe you £100k before my inheritance is distributed and duly give you that after receipt of inheritance is that a debt repaid or a promise or gift or am I the vulnerable victim of a crime.. who knows... but I rather suspect eyes would be cast very carefully over such if detected and questions asked. Any gross abuse of rules I suspect would lead to changed law surrounding the qualification of 'legitimate debt' alongside motivation for creation of such. But as we know courts... tribunals.. will be forever interpreting law, and creating case law, even if it is very clear or appears black and white.

https://www.legislation.gov.uk/uksi/2013/376/regulation/50

Notional capital

50.—(1) A person is to be treated as possessing capital of which the person has deprived themselves for the purpose of securing entitlement to universal credit or to an increased amount of universal credit.

(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.

In this case it is an unless that passage is ruled unlawful then it stands as it's so clear cut there is no room for interpretation.

What it would come down to as you state what is legitimate debt, and I agree with that point, it needs to be legitimate as in a debt that legally needs to be repaid. If I buy a car  £50k with my credit card, that debt would be enforceable as there is a legal agreement, if you "lent" me that £50k  to buy that car then it might not be considered legally be considered a debt so it's actually a gift, and as such  wouldn't be covered in above regs.

NedS

HillStreetBlues said:

There a current thread on here about paying most of wages into pension clearly that person knows that doing so increases their UC, as that is allowed there is no DoC no matter what the DWP might think. 

That is completely different - in that example pension contributions are not made from capital, but from income so Deprivation of Capital rules are not relevant to this example.

HillStreetBlues

NedS said:

HillStreetBlues said:

There a current thread on here about paying most of wages into pension clearly that person knows that doing so increases their UC, as that is allowed there is no DoC no matter what the DWP might think. 

That is completely different - in that example pension contributions are not made from capital, but from income so Deprivation of Capital rules are not relevant to this example.

I agree it's not DoC  I have corrected my post,.
I meant to compare it's important how the regs are written and can be legally used in a way no doubt wasn't intending, so the same in that regard.

hardergamer

I recently had a compensation payout that put me over the £16K UC cut-off, but the DWP/UC didn't close my UC or PIP. Still, they put a freeze of 3 months on my UC until I brought my bank account back below £16k, UC advised me to spend the money on things I really needed, like around my home etc, which I did by spending just under £3k on white goods settee etc, and used around £3500 to clear debts off, then UC resumed my normal payment, but with deductions.

Also, a friend of mine who has brain damage and is on UC/PIP inherited a large sum of £370k about 2-3 years ago when his dad passed away, and he kept his UC/PIP, as they put the money in a trust fund, where he can only spend it on things like white goods cars etc, but what he's been using around £10k per year on is going on cruise ships and holidays with his partner, and he gets zero taken away from his UC.

To be clear, his family set up the trust, not the DWP.