Universal credit: refusing legacy = deprivation of capital?

Grumpy_chap

Exodi said:

So I'm clear, are we saying that if I receive a large inheritance and claim UC, then use the money to buy a helicopter to do the school run = clear-cut DoC. But if I take out finance on the helicopter for 1 day and then repay it = in the clear son, here's your UC?

Well, sort of but, obviously, before receiving the inheritance and while still on UC, you need to transfer your child from the local secondary modern to a suitable public school (with the associated fees) and then buy the helicopter on CC, and then receive the inheritance and use that inheritance to pay off the debt so retaining UC, which will need to be sufficient to meet the ongoing public school fees.

Anyway, I do not recommend it because if you send your children to the public school where the helicopter school run is a common-place, you will subject your children to endless ridicule because their Mum's helicopter is a bit of a cheap and old model and about time the parents upgraded to the latest transport. 

Muttleythefrog

Grumpy_chap said:

Muttleythefrog said:

I would imagine since the action was first to purchase goods (Rolex watch for £20k let's imagine) rather than pay a debt (which would have to take place afterwards by at least a couple of working days due to time delay of transactions lodging on credit card accounts) then they'd rule it was unreasonable spending (unless claimant could convince it was reasonable for them).

It might not be as simple as that.
The query around buying Rolex watches (or Kruggerand coins) arises from time to time as a means to keep below the savings thresholds for UC and personal effects not being classed as capital.

Regardless of the discussion around the DoC, is the individual on UC, with the expected £20k inheritance, realistically going to be in a position to obtain £20k of unsecured / credit-card debt with which to buy the £20k Rolex so that they can then receive the £20k inheritance and use it to pay off debt?

Secondly, the individual would have inherited the £20k that they could spend on more mundane things that are needed / wanted and now has a Rolex which, if they sell to release funds to spend on more mundane things that are needed / wanted will put the £20k in the bank and, hence, back to square one.

I think on paragraph one.... the issue of the expenditure and reasonableness would surely arise before considering owning personal effects... at least in the methodical way judgements are taken. If not then of course then the issue of whether such would be a personal effect becomes yet another term open to legal interpretation and this probably would be considered a personal possession which is why I was happy to use it in this scenario on the assumption it wouldn't be considered capital. If it was somehow considered as capital then the scenario becomes redundant as there would be no DoC... they still would have the capital (or probably gained such if using a CC to buy it!) and at that kind of value likely would end entitlement.

Paragraph 2 - obviously we're creating some extreme examples... just plugging in numbers.. in this case to avoid a realistic possibility a judge would think a £20k watch for someone living on means tested benefits was reasonable in their circumstances... there's a risk the £500 watch would be considered reasonable expenditure for someone who likes to wear a nice watch that should last a lifetime. For reference I have 5 figure access to credit on just one of my credit cards I've had a couple of years while on benefits so I suspect benefit claimants often will be able to create notable debt.

On paragraph 3.... yeah... but it's just an example and I would imagine in such a scenario the end would be satisfactory to them or they'd do something different to deprive themselves of monies... possibly in a way that they could undetected convert their acquired goods or services into cash or something more useful. A nice extension (to the home you own and live in which is never considered as capital) could cost similar and then you enjoy the benefits (pun intended) of that along with a more valuable asset. Notably there seem to be a lot of pawn shops in areas of high levels of benefit claimants

HillStreetBlues

NedS said:

I would put forward the following example to show how what may appear to be straight forward rules may get interpreted differently.

Assume I have an inheritance of £20,000 coming, and I know this will end my entitlement to means-tested benefits (UC). I have no debts I can pay off.

I've always wanted to go on a round the world cruise or own a Rolex watch (insert your pleasure here), and now I can afford to do just that, with my £20k inheritance. The only problem is that this will be classed as deprivation of capital, and UC will treat me as if I still have that capital and end my UC claim. Simple, right?

What if I pay for my cruise or Rolex using my credit card? I now have £20k of credit card debt, and paying off debt is never deprivation of capital. My intention is clear - that is to deprive myself of that capital so I can continue to claim UC.

As others have stated above, I'm pretty sure DWP would view this as deprivation of capital and would make the decision to end the claim as not entitled. The claimant would then have to take it to tribunal for an independent magistrate to rule on it. I would of course argue that "paying off debt is never deprivation of capital".

Both sides have viable arguments when considering only the rule that applies to their argument. Good luck to the magistrate making a ruling on that. The question the tribunal needs to rule on is whether the way the debt was incurred can ever be considered as relevant.

You would have to totally rewrite the rules saying repayment of debt can be DoC.
A person overpays their mortgage, their reason for doing so is so they maintain or increase their entitlement to UC that could also could be DoC.  
What's important isn't the viewpoint of DWP  it's what's written in statute  They repayment of debt never being DoC is generous and open to abuse, if they want to stop the abuse then the regs need to be tightened.

HillStreetBlues

Grumpy_chap said:

Regardless of the discussion around the DoC, is the individual on UC, with the expected £20k inheritance, realistically going to be in a position to obtain £20k of unsecured / credit-card debt with which to buy the £20k Rolex so that they can then receive the £20k inheritance and use it to pay off debt?

It depends, I'm not working and on UC total credit limit across credit cards & overdrafts is about £40k all have been applied for while on UC.

NedS

kaMelo said:

NedS said:

I would put forward the following example to show how what may appear to be straight forward rules may get interpreted differently.

Assume I have an inheritance of £20,000 coming, and I know this will end my entitlement to means-tested benefits (UC). I have no debts I can pay off.

I've always wanted to go on a round the world cruise or own a Rolex watch (insert your pleasure here), and now I can afford to do just that, with my £20k inheritance. The only problem is that this will be classed as deprivation of capital, and UC will treat me as if I still have that capital and end my UC claim. Simple, right?

What if I pay for my cruise or Rolex using my credit card? I now have £20k of credit card debt, and paying off debt is never deprivation of capital. My intention is clear - that is to deprive myself of that capital so I can continue to claim UC.

As others have stated above, I'm pretty sure DWP would view this as deprivation of capital and would make the decision to end the claim as not entitled. The claimant would then have to take it to tribunal for an independent magistrate to rule on it. I would of course argue that "paying off debt is never deprivation of capital".

Both sides have viable arguments when considering only the rule that applies to their argument. Good luck to the magistrate making a ruling on that. The question the tribunal needs to rule on is whether the way the debt was incurred can ever be considered as relevant.

I think the timeline is important to determine motivation. If the purchase(s) were made with full knowledge of a future inheritance then to me, their motivation is clearly manipulation of their situation to fit the rules.

Having said that, judges hold DWP/local authorities to a very high bar in terms of proof, even though it doesn't pass the smell test I don't think it would be easy to prove.

I think, for the purposes of this hypothetical discussion, we all except that intent exists.

The legal question is whether it now constitutes a debt and whether they are permitted to repay that debt without deprivation of capital.

If we are questioning the intent, then the debt aspect (purchasing on a credit card to make it a debt) is irrelevant as, without intent it cannot be deprivation of capital as it has to be deliberately done with the intention of claiming (more) benefits to be DoC.

andrewmp

NedS said:

I would put forward the following example to show how what may appear to be straight forward rules may get interpreted differently.

Assume I have an inheritance of £20,000 coming, and I know this will end my entitlement to means-tested benefits (UC). I have no debts I can pay off.

I've always wanted to go on a round the world cruise or own a Rolex watch (insert your pleasure here), and now I can afford to do just that, with my £20k inheritance. The only problem is that this will be classed as deprivation of capital, and UC will treat me as if I still have that capital and end my UC claim. Simple, right?

What if I pay for my cruise or Rolex using my credit card? I now have £20k of credit card debt, and paying off debt is never deprivation of capital. My intention is clear - that is to deprive myself of that capital so I can continue to claim UC.

As others have stated above, I'm pretty sure DWP would view this as deprivation of capital and would make the decision to end the claim as not entitled. The claimant would then have to take it to tribunal for an independent magistrate to rule on it. I would of course argue that "paying off debt is never deprivation of capital".

Both sides have viable arguments when considering only the rule that applies to their argument. Good luck to the magistrate making a ruling on that. The question the tribunal needs to rule on is whether the way the debt was incurred can ever be considered as relevant.

That scenario seems very straightforward. They didn't have capital when they bought the watch. Available credit is not considered capital, therefore it's impossible to deprive yourself of capital you don't have by buying an expensive watch. 

Then, once you do have capital, it's impossible for it to be deprivation of capital because they spent it repaying a debt.

HillStreetBlues

andrewmp said:

That scenario seems very straightforward. They didn't have capital when they bought the watch. Available credit is not considered capital, therefore it's impossible to deprive yourself of capital you don't have by buying an expensive watch. 

Then, once you do have capital, it's impossible for it to be deprivation of capital because they spent it repaying a debt.

I agree
I think the issue is trying to link them together A+B=C  but A & B are judged separately and aren't actually linked so there is no C

Yamor

I agree that by a literal reading of the regulations, a person cannot be treated as depriving themselves of capital in these sort of circumstances.

However, having been 'burned' a couple of times in similar situations at the Tribunal level, I am slightly wary of being overconfident that it would be fine.

This is because of the greater propensity in recent times for the courts to take a purposive approach to statutory interpretation, starting with the Pepper v Hart case from the '90s.

How exactly that approach could be used in the circumstances under discussion here is a good question.
The reasons to apply it are fairly straightforward: because the literal meaning of the legislation leads to an absurdity (which is one of the scenarios stated in the Pepper v Hart case).
However, there still must be some way of reading the purposive meaning into the words of the legislation, and that isn't so straightforward.
Perhaps the simplest would be to somehow limit the meaning of the word "debt" in the regs to debt which has not been taken out to take advantage of the exception provided by the legislation.

It may even be that a Tribunal would differentiate between different cases. For example, paying for something on a credit card, and then immediately paying off the credit card bill in full by the due date would probably be considered to be worse, as it is very common for many people to make all their purchases in such a fashion.

HillStreetBlues

Yamor said:

Perhaps the simplest would be to somehow limit the meaning of the word "debt" in the regs to debt which has not been taken out to take advantage of the exception provided by the legislation.

I agree, add a "good faith" term,  so a debt can be judged on that. Any "bad faith" debt repayment could be classed as DoC.

It would be much simpler to made an amendment than battle though the courts on a case they might lose.

andrewmp

Yamor said:

I agree that by a literal reading of the regulations, a person cannot be treated as depriving themselves of capital in these sort of circumstances.

However, having been 'burned' a couple of times in similar situations at the Tribunal level, I am slightly wary of being overconfident that it would be fine.

This is because of the greater propensity in recent times for the courts to take a purposive approach to statutory interpretation, starting with the Pepper v Hart case from the '90s.

How exactly that approach could be used in the circumstances under discussion here is a good question.
The reasons to apply it are fairly straightforward: because the literal meaning of the legislation leads to an absurdity (which is one of the scenarios stated in the Pepper v Hart case).
However, there still must be some way of reading the purposive meaning into the words of the legislation, and that isn't so straightforward.
Perhaps the simplest would be to somehow limit the meaning of the word "debt" in the regs to debt which has not been taken out to take advantage of the exception provided by the legislation.

It may even be that a Tribunal would differentiate between different cases. For example, paying for something on a credit card, and then immediately paying off the credit card bill in full by the due date would probably be considered to be worse, as it is very common for many people to make all their purchases in such a fashion.

It's a very interesting discussion. 

I think it's likely they would look at the addition of a new regulatory exclusion for repayment of debt as being designed to repair the mischief/uncertainty in the legacy benefit system around repayment of debt. 

The devil in the detail would be discussions around why the exclusion was created, I'm sure there will be records on Hansard, but does anyone know why they added the exclusion to the UC regulations instead of letting established benefit caselaw from legacy benefits apply? The 'golden rule' could possibly be applied in cases of absurdity such as the helicopter example? 

https://www.e-lawresources.co.uk/the-golden-rule-of-statutory-interpretation

It's all very interesting, but as the article states it should be used sparingly.