Universal confusion?

Carlos Hagi considers some recent enquiries to the Expert Advice team on issues related to the roll out of Universal Credit

This article was originally published in the October 2017 issue of Adviser magazine and was correct at the date of publishing.

According to the authors of the legislative guide to Universal Credit (UC), ‘The introduction of UC is the biggest change to the social security system since the abolition of supplementary benefit and its replacement with income support 30 years ago.’¹ As the authors also point out, ‘…the aim of simplification is currently being frustrated by the decision to phase UC in over a period of years … so that what has been achieved is not a simplification of the benefits system but a significant complication. During the transition, UC is not a replacement benefit but an additional benefit.’² The roll out of UC has therefore created unique challenges for advisers. The Citizens Advice Expert Advice benefits team has seen the number of UC enquiries grow from four in 2013 to 226 in 2016. By August this year we had dealt with 159 UC queries and the upward trend is set to continue. What follows is a selection of queries that we have dealt with recently.

QUERY: The client was in receipt of contributory Employment and Support Allowance (ESA), which stopped when she failed a work capability assessment. She is an owner-occupier without mortgage costs and has capital in excess of £16,000. She has a child and receives child tax credit (CTC). She lodged a mandatory reconsideration against failing the Work Capability Assessment (WCA). The client had read that she was not entitled to UC due to her savings and approached the Department for Work and Pensions (DWP) for advice, which told her to claim UC anyway. She received a decision that she is not entitled to UC due to savings of over £16,000. However, her CTC has stopped and HMRC is not letting her reclaim it. Is this possible?

ADVICE: Unfortunately it is. Claiming UC and receiving a decision that she was not entitled terminated your client’s award of CTC due to Reg 8 UC (Transitional Provisions) Regulations 2014. Under Reg 8(1) of those regulations, if the client meets the basic conditions of entitlement to UC in section 4(1)(a) to (d)of the Welfare Reform Act 2012, but is subsequently not entitled under the means test, then any award of income support, housing benefit or tax credits to which your client was entitled terminates under Reg 8(2).The basic conditions of entitlement are that the claimant is at least 18 years old, under the qualifying age for state pension credit, is in Great Britain and is not receiving education. So if the client meets these, but then goes on to fail the means test and is not entitled to UC, this would end her CTC award. Reg 8(2)(a) provides for the award of tax credits (in your client’s case) to terminate ‘if the claimant is not entitled to UC, on the day before the first date on which he or she would have been so entitled, if all of the basic and financial conditions applicable to the claimant had been met.’ So if your client met the basic conditions of entitlement to UC but fails the means test, then her tax credits are lawfully terminated.

Reg 6 of the Transitional Provisions Regulations prevents claims to income support, housing benefits and tax credits by a UC claimant in most cases. The client cannot be defined as a UC claimant under this provision. However, she is still prevented from reclaiming her CTC under the provisions of the commencement order that introduced the UC full service into your client’s postcode by removing the gateway conditions that previously applied when it was only a live service³. This commencement order brings into force Art 7 of the No 23 Order⁴, which generally prevents new claims to income support, housing benefit and tax credits unless certain narrow conditions apply, none of which do in your client’s case.

This would not have happened in the live service, as your client would have been prevented from claiming UC by failing gateway conditions (challenging the ESA decision and having a child living with her). However, unfortunately, her CTC award has gone and cannot be revived. Although your client will of course get her Employment and Support Allowance (ESA) back if the mandatory reconsideration is unsuccessful and she appeals. We can only advise a complaint of maladministration against the DWP with a request for compensation, if she can demonstrate that she was wrongly advised to claim UC despite the DWP knowing that she would not be entitled due to excess capital.

QUERY: My client is self-employed and was in receipt of working tax credit (WTC) when she became unwell. She attempted to make a claim for contributory ESA (cESA). She was incorrectly advised by the UC helpline that it was necessary to make an online claim for UC so that cESA could be awarded. On attending Job Centre Plus (JCP) for an interview she was advised that she would be better off remaining on WTC, to cease the pending application for UC and make another attempt to claim cESA. She was then notified by HMRC that her WTC claim had terminated due to her claim for UC. JCP suggested she write a letter requesting reinstatement of her WTC claim. Since that time the client has spoken with HMRC, which has suggested that it will not be possible to reinstate her WTC payments.

ADVICE: A decision has not yet been made on your client’s entitlement so she can still withdraw her claim for UC. Reg 31 UC (Claims and Payments) Regulations 2013⁵ allows withdrawal at any time before a determination has been made on the claim. However, even if it was accepted that she had withdrawn her UC claim, she may still have difficulty in getting her WTC reinstated. A person does not have to actually receive UC in order for their legacy benefits to end; they will end if the person claims UC and they meet the basic conditions of entitlement, even if UC is not actually awarded (because they do not meet the financial conditions), as in the above example. In such a case, Reg 8(2) states that the tax credits end:

a) on the day before the first date on which the claimant is entitled to UC in connection with the claim; or

b) if the claimant is not entitled to UC, on the day before the first date on which he or she would have been so entitled, if all of the basic and financial conditions applicable to the claimant had been met.

However, it may be arguable that this provision to terminate tax credits cannot apply to your client. Paragraph(a) cannot apply as there will have been no entitlement to UC because the claim was withdrawn, and paragraph(b) only ends tax credit entitlement from the day before the date on which the person would have been entitled to UC had the financial conditions been met. In your case, the client would not have been entitled to UC at all (even if the financial conditions had been met) as she had withdrawn her claim. So it may be arguable that Reg 8 has no application in her case and so WTC should not have been stopped. Clearly, for paragraph(a) to apply there will have been a decision on entitlement. What is not clear is whether paragraph(b) requires a decision, so that a claim can be withdrawn before it is engaged, or if it is a purely hypothetical situation that catches all claims. It is arguable that for Reg 8(2)(b) to apply there must have been a decision, otherwise how can it be decided that a claimant is not entitled to UC?

Under Reg 6(2)(b) of the same regulations, a claimant is still a UC claimant if a claim for UC has been made and a decision has not been made — this would prevent a new claim to tax credits, but it is not authority for ending an existing claim to tax credits. It is therefore arguable that HMRC has jumped the gun in removing the WTC award before a decision on UC entitlement was made; once a decision has been made then it would not matter whether your client was entitled to UC or not under 8(2)(a) or (b). We would suggest that your client withdraw her UC claim and request a mandatory reconsideration of the tax credits decision that ended her award. This argument was accepted by a First-tier Tribunal in another case of ours and we are waiting to see if HMRC will try to appeal. However, the argument is untested at UT as of yet, so the position remains unclear. Your client should consider submitting a complaint to the DWP if it advised her that she had to make a claim for UC in order to claim cESA. That information was clearly wrong, and has led to the ending of her WTC claim (should any challenge she makes not succeed). She may wish to seek compensation from DWP in relation to its wrong advice.

QUERY: My client lives in a live service area and made a claim for UC. She started part-time work shortly after her claim. At her JCP interview it was picked up that she failed a gateway condition and she subsequently received a letter stating that she was not entitled to claim UC right now and could claim ‘legacy’ benefits, with her date of claim being treated as the date she claimed UC. She tried to claim housing benefit (HB), but the local authority (LA) says she is not entitled as she is still a UC claimant.

ADVICE: What appears to have happened here is that your client started work very soon after claiming UC so she failed one of the gateway conditions that operate in live service: ‘If the claimant is a single claimant, the claimant must declare that, during the period of one month starting with the date on which the claim for Universal Credit is made, the claimant’s earned income is expected not to exceed £338.’⁶ The letter from UC makes it very clear that the client is not entitled to claim UC, so she is not excluded from claiming HB under Reg 6 UC (Transitional Provisions) Regulations 2014. Technically, under the provisions of the Commencement Order that introduced live service, if your client gave incorrect information about satisfying a gateway condition and she has not been paid UC, then the UC provisions do not come into force⁷.

However, it appears (although it is not clear) that the LA has refused her claim under the provisions that define a person as a UC claimant during a six-month ‘re-award period’, which applies in live service only⁸. This re-award period allows a claimant who has come off UC due to earned income to be re-entitled to UC without making a claim, for a six-month period⁹. They are just required to notify a reduction in income and UC can be re-awarded. As no further claim is required during this period, the person remains a UC claimant; gateway conditions do not apply and they cannot revert to ‘legacy’ benefits, including HB. It appears that the LA may be confused between the client not being entitled to UC and not being entitled to claim UC. They obviously believe that the client was not entitled to UC as her earned income was too high, but that she was still a UC claimant due to the above. However, the letter from UC makes it clear that the client was never allowed to claim UC because she failed a gateway condition and this was recognised before a decision on her claim was made and payment began. We would recommend an appeal of the decision citing the above.

QUERY: My clients are a couple who are both in receipt of contributory ESA (support group) and both have an underlying entitlement to Carer’s Allowance as both receive a PIP-enhanced daily living component. They also receive income-related ESA due to entitlement to various premiums. They have moved into a full UC area and need to make a new claim for HB. The LA has told them that a new claim to HB will abolish their income-related ESA as they will come under UC. Is this correct?

ADVICE: In UC full service areas, a new claim for HB will not be possible unless the claim is for ‘specified accommodation’, which this is not. As your clients have moved from one LA to another, this would require a new claim to HB. (If they had moved within the same LA, this should not require a new claim to HB as the old claim could have been dealt with as a change of circumstances¹⁰.)

However, a new claim to HB would not abolish your client’s entitlement to income-related ESA; that can only be abolished by (in your case) a claim for UC.¹¹ So-called ‘natural migration’ to UC is triggered by a client not being entitled to a ‘legacy’ benefit and having to claim UC to get the equivalent — in your case, help with housing costs. The claim to UC would then abolish the income-related ESA award. All that the HB claim should do is lead to a decision that your clients cannot claim it in UC full service.¹²

In your case, your clients are both entitled to the Severe Disability Premium (SDP); the Carer’s Premium and the couple rate Enhanced Disability Premium (EDP), which gives them a total of £149.75 income-related ESA per week on top of their contributory ESA entitlement. Under UC, there is no SDP or EDP. Your clients would receive one limited capability-for-work-related activity element and one carer element (as they are a couple, these are not both payable to the same person). Their means tested ‘top up’ under UC would be £4.44 per week, a weekly loss of income of £145.31 compared with income-related ESA. In order to get help with their housing costs, your clients would have to claim UC. Housing costs would be paid under the housing element of UC, which in your client’s case would be equivalent to the same amount that they would have got under HB. But a claim for UC would abolish your client’s entitlement to income-related ESA, so in this case it may be worth the clients not claiming UC if their rental costs are less than £145.31 per week. If this applies and your clients fund the rent out of their income-related ESA, they may still be better off than if they had claimed UC.

In conclusion, we obviously only see cases where things go wrong. However, as our selection of queries shows, the rules on transition to UC are complex, with the potential for incorrect official advice and decision-making, and so-called ‘natural migration’ can, to the people affected, appear arbitrary.

Carlos Hagi works in the Welfare Benefits Expert Advice team at Citizens Advice

Endnotes

1. Social Security Legislation 2016/17 Vol. V Sweet and Maxwell P. vii
2. Ibid P.5
3. Art.12 of The Welfare Reform Act 2012 (Commencement №13, 14, 16, 19, 22, 23 and 24 and Transitional and Transitory Provisions (Modification)) Order 2016 (SI.№596/2016)
4. The Welfare Reform Act 2012 (Commencement №23 and Transitional and Transitory Provisions) Order 2015 (SI 2015/634)
5. UC, Personal Independence Payment, Jobseeker’s Allowance and Employment and Support Allowance (Claims and Payments) Regulations 2013 (SI 2013/380)
6. Schedule 5 to the Welfare Reform Act 2012 (Commencement №9 and Transitional and Transitory Provisions and Commencement №8 and Saving and Transitional Provisions (Amendment)) Order 2013 (SI 2013/983)
7. For example, see Art. 4(2)(b) of the above
8. Reg. 6(2)(ba)(i) The Universal Credit (Transitional Provisions Regulations 2014 (SI 2014/1230)
9. Reg. 6 The UC, Personal Independence Payment, Jobseeker’s Allowance and Employment and Support Allowance (Claims and Payments) Regulations 2013 (SI 2013/380), as applied by the saving provision in Reg 5 The Universal Credit (Digital Service) Amendment Regulations 2014 (SI 2014/2887)
10. Reg. 79(1) Housing Benefit Regulations 2006 (SI 2006/213)
11. For example, see Art.4(2) The Welfare Reform Act 2012 (Commencement №23 and Transitional and Transitory Provisions) Order 2015 (SI 2015/634)
12. For example see Art.7 of the above