UC & Personal Injury Payment

HillStreetBlues

Follow-on from this thread as wanted a better title https://forums.moneysavingexpert.com/discussion/6645427/uc-interest

Quick back story my friend (M) and I were injured in a car crash, M was driving, 100% the other parties fault.

M was offered and accepted a Part 36 (well over £16k) and now has the payout (so far I've not been offered one), money is now in their bank account. On my advice it's in an account that earns interest as it's disregarded for 12 months UC Regs 75(6), that gives M time for them to fully decide to either set up a Personal Injury Trust, or just put the money in Trust which would be a joint bank account with me. Like to thank @Yamor for the case law.

I think it's best to declare the money now, although as it's disregarded by law it's not legally necessary. M will have all the paperwork, including the Part 36 offer and payment from solicitors.

What would be the best way to do this? as I've never had to update my capital as it's always been below £6k. Can you report disregarded capital via Report a change….. Money, savings and investments? as it's not actually a change in the calculation of UC. Or is it better do do via Journal? M is on LCWRA so unsure when it will be read.

NedS

There is no specific tick box or option that allows you to report that capital is to be disregarded. To declare the change online, report the capital and put a note in the journal stating that it is a personal injury payment and is to be disregarded under UC Regs. Maybe even cite the UC Reg and ADM guidance. Request a ToDo is generated to upload the evidence of the personal injury payment and/or book an appointment to provide the evidence at the jobcentre. They will probably want them to attend an evidence appointment rather than upload documents online.

They will need to provide evidence of ALL capital and accounts, not just the account the personal injury payment landed in. They should also provide accompanying paperwork that you mention.

Be aware, that from the moment they declare the capital their UC payments will likely be suspended pending verification of the capital and that it can be disregarded. So maybe best to declare it at the start of an AP rather than towards the end of an AP.

HillStreetBlues

Thanks Ned,
I had thought the same with the start of AP, didn't know if they would stop the payment due after AP finished so waited for the payment on Friday just gone.
I expect a bit of a delay in them sorting it out, just hope it isn't that long.

TimeLord1

I see someone doing the proof uploading the evidence first; I think it was the interest that started to accumulate that started to reduce the claim. And they had a personal injury account separate from their spousesor joint finances.

HillStreetBlues

As it's not in trust then the interest won't be disregarded, but will be when in trust.
That's not going to be an issue as other capital is under £6k, also a car will be bought in the near future.

TimeLord1

Good luck, lad. I know a lot of people put it towards life insurance; it just depends on your age and circumstances. It's also sometimes decades for these people to payout what they owe for injuries my late friend had to wait years.

HillStreetBlues

I did forget about council tax reduction.
Just been looking https://www.legislation.gov.uk/uksi/2012/2886/appendix/10/made

Capital Disregards
17.  Where the funds of a trust are derived from a payment made in consequence of any personal injury to the applicant or applicant’s partner, the value of the trust fund and the value of the right to receive any payment under that trust.

My reading of it is that once it's in trust, the money and also the interest (as that's the value of the right to receive payment) are disregarded the same as UC.

Yamor

https://forums.moneysavingexpert.com/discussion/comment/81914692#Comment_81914692

It may be that interest even within the trust will count as capital. See my post in the original thread referencing the letter from DWP.

Unless of course it is a discretionary trust, and not a bare trust.

HillStreetBlues

https://forums.moneysavingexpert.com/discussion/comment/81916564#Comment_81916564

Thanks for the reply.
Am I misunderstanding 75(4)
If the sum is held in trust, any capital of the trust derived from that sum is to be disregarded in the calculation of the person's capital and any income from the trust is to be disregarded in the calculation of the person's unearned income.

My thoughts are that the interest will be capital and never unearned income, so that capital is derived from the original payment will be disregard.
But if it was income, that would be disregarded as unearned income, but when that unearned income becomes capital, then that capital might not be disregarded.

With the case law you linked to https://assets.publishing.service.gov.uk/media/5e68fab7d3bf7f269e22a12e/CJSA_2628_2017-00.pdf
the amount of interest earned was never mentioned, also leading me to think it was also disregarded.

Yamor

I'm not entirely clear what you mean, but:

1. It is possible for interest to be unearned income: where it is income from a trust (reg. 66(1)(j). That is the situation where the income disregard provided for by reg. 75(4) is required.
2. The interest will in any event not be capital immediately, but only from the following AP (at the earliest), as reg. 72(3) doesn't apply where reg. 72(2) applies.
3. The question is only whether interest from funds held in a trust which was set up using funds from a personal injury award can also be disregarded by virtue of being "derived" from the sum awarded due to the personal injury.
4. In the other thread I had originally said that I thought it was arguable that the interest was also derived from the personal injury money.
5. However, I then found the DWP letter which seems to say that DWP's position is that "derived" only goes one step and no further. So, the funds put into a trust from the personal injury award are derived from that award, but the interest earned on that sum is not (despite deriving from the sum held in the trust which derives from the personal injury award).

HillStreetBlues

https://forums.moneysavingexpert.com/discussion/comment/81917226#Comment_81917226

Will have a better read of it all a bit later.
One question pops into my mind, if it was unearned income would that be deducted from the UC amount?