Universal credit and limited capability for work — case law update

In JW v SSWP [2022] UKUT 117 (AAC) the Upper Tribunal considered provisions which affect the transition from receiving national insurance credits for limited capability for work to universal credit (UC).

Some claimants will be entitled to receive national insurance credits when they have limited capability for work (LCW) or limited capability for work and work-related activity (LCWRA). As well as helping them maintain their national insurance record for the purposes of the state retirement pension, such credits offer advantages when it comes to certain means-tested benefits such as UC, as this case shows.

The case concerned the application of regulation 21 of the Universal Credit (Transitional Provisions) Regulations 2014 (“the TP Regs”). This regulation and case are important in the transition to Universal Credit (UC), with regards to how clients can be determined to have LCW or LCWRA without needing to undergo a new work capability assessment (WCA). It also affects whether they need to serve a ‘relevant period’ of at least 3 months before the LCWRA element (additional money for those who qualify) is included in their award.¹ This article discusses the case and what it means for clients.

What was the case about?

The appellant (A) had been receiving income-related employment and support allowance (irESA) from 2008 until 21 April 2019. She was in the support group, meaning she had been found to have LCWRA for irESA. On 21 April 2019, her irESA award ended because her partner started working more than 24 hours per week so she was no longer entitled to irESA.² Moreover, she was not entitled to contribution-based ESA due to not meeting the national insurance contribution conditions. Six months after her irESA award ended, she claimed UC.

The Department for Work and Pensions (DWP) arranged for a work capability assessment (WCA) and found that A had LCWRA for UC. The DWP decided that she could not get the LCWRA element until the end of the 3 month ‘relevant period’. This meant that A’s UC award was less than she expected it to be, because the LCWRA element was not included initially.

A appealed to the First-tier Tribunal (FTT).

What did the FTT decide?

A argued that, because the only reason the client’s irESA award had stopped was because her partner had started full time work, the LCWRA determination from her irESA award was still valid, having never been displaced. Therefore, she argued that she was entitled to national insurance credits for LCW, as she had not subsequently failed a WCA. The entitlement to national insurance credits is based on regulation 8B of the Social Security (Credits) Regulations 1975 (“the 1975 Regulations”) which are discussed in more detail in the next section.

A argued that the LCWRA element should have been paid from the first assessment period (AP) under regulation 21 of the TP Regs. Reg 21 is a provision which applies to a person who claims UC on a date when they are entitled to be credited with national insurance contributions under reg 8B of the 1975 Regulations. Where it applies, the claimant will effectively have their LCW or LCWRA determination transferred over to UC and will not need to serve the relevant period before the element can be included.

However, the FTT dismissed A’s appeal, agreeing with the DWP that the client had to serve the 3 month relevant period because ‘the link between the previous ESA claim and the Universal Credit claim was broken by the gap’ between irESA ending in April 2019 and the UC award commencing in October. There was no proper consideration of reg 21 of the TP Regs in the FTT’s decision.

A appealed to the Upper Tribunal (UT), which considered reg 21 of the TP Regs and reg 8B of the 1975 Regulations in detail.

What did the UT decide?

Regulation 28(1) of the UC Regs introduces the 3 month ‘relevant period’ before the LCWRA element can be included:

An award of universal credit is not to include the LCWRA element until the beginning of the assessment period that follows the assessment period in which the relevant period ends.

Reg 28(2) provides that the relevant period is 3 months. Reg 28(1) is the reason why, in most cases, a UC claimant needs to wait at least 3 months before their UC award can include the LCWRA element.

There are exceptions to the requirement to serve the relevant period. For example, if a claimant was previously entitled to UC with an LCWRA element within the past 6 months but that award ended due to excess income, then on a new UC claim the claimant does not have to serve a relevant period.³ Moreover, if a claimant is terminally ill they do not have to serve a relevant period.⁴ If A had been entitled to new-style ESA (nsESA) with the support component, she would not have had to serve the relevant period.⁵ However, none of these exceptions applied to A, who had not previously been entitled to UC, was not terminally ill, and did not have an award of nsESA shen she claimed UC.

Judge Wikeley noted that, importantly, reg 28 did not contain the complete set of exceptions to the requirement to serve the relevant period. That is where the TP Regs entered the picture.

Chapter 3 of Part 2 of the TP Regs introduces numerous provisions to cover claimants who transfer from legacy benefits to UC. An important provision is reg 19, which covers those claimants who were entitled to an award of old-style ESA (either income-related or contribution-based) on the date they claim UC. However, reg 19 did not help A, as her irESA award had ended 6 months before the UC claim. A’s argument therefore rested on reg 21 of the TP Regs, titled ‘Other claimants with limited capability for work: credits only cases’. Reg 21 applies where:

(a) an award of universal credit is made to a claimant who was entitled to be credited with earnings equal to the lower earnings limit then in force under regulation 8B(2)(iv), (iva) or (v) of the Social Security (Credits) Regulations 1975 (“the 1975 Regulations”) on the date on which the claim for universal credit was made or treated as made (the “relevant date”); and

(b) neither regulation 19 nor regulation 20 applies to that claimant (whether or not, in the case of joint claimants, either of those regulations apply to the other claimant).

The question was whether A was ‘entitled to be credited with earnings’ under the relevant provisions of reg 8B(2) of the Social Security (Credits) Regulations 1975. Reg 8B(2)(a) provides for various situations where a person can claim national insurance credits for limited capability for work. The relevant situation in this case was set out in reg 8B(2)(a)(iv), which applies to a week in which each of the days:

was a day of limited capability for work for the purposes of Part 1 of the Welfare Reform Act (limited capability for work) or would have been such a day had the person concerned been entitled to an employment and support allowance by virtue of section 1(2)(a) of the Welfare Reform Act;

Before the UT, the DWP accepted that this provision applied to A, because the only reason she was not entitled to ESA was because she did not satisfy the national insurance contribution conditions in section 1(2)(a) of the Welfare Reform Act 2007. Therefore, the client was entitled to national insurance credits from the end of her irESA award, because the only reason her award ended was due to her partner’s work. She still continued to satisfy all of the basic conditions of entitlement.

Judge Wikeley found that it did not matter whether Her Majesty’s Revenue and Customs (HMRC) had in fact been awarding the credits. Rather, what mattered was whether the client was entitled to them. On this point, the judge considered one possible issue. Reg 8B(4) of the 1975 Regulations provides that a day shall not be a day to which reg 8B(2)(a) applies unless the person has provided a written notice and statement of grounds as to why they are entitled to credits. In this case, A had not done this. However, he accepted the DWP’s submission that any decision awarding ESA automatically awards credits. If entitlement to ESA ends for a reason other than no longer satisfying the basic condition of having LCW, then that decision awarding credits is final and remains in place. Credits would be awarded automatically and the claimant’s entitlement regularly reviewed (for example, to check whether they still have LCW).

Judge Wikeley accepted that reg 21 applied and so A did not have to serve the relevant period before receiving the LCWRA element. The FTT was wrong to not consider reg 21 of the TP Regs; it had focused only on the exceptions in reg 28 of the UC Regs.

What does this mean for clients?

Many advisers will be familiar with reg 19 of the TP Regs, which allows for LCW or LCWRA status to carry over from old-style ESA to UC, without the claimant needing to undergo a WCA again or serve the 3 month relevant period. Reg 19 is an important provision in the transition from old style ESA to UC, but it does not always apply because, as in this case, if the claimant was not entitled to ESA on the date of their UC claim, reg 19 will not cover them.

The favourable outcome in this case is a reminder to be aware of reg 21 of those regs. Reg 21 is helpful because if the client can show that they have remained entitled to NI credits for LCW, even if the credits have for whatever reason not actually been awarded, they too will not have to undergo the WCA or serve the relevant period.

Example

Jane received irESA in the support group for 5 years, until 2020 when she gave up her award when she moved in with her partner Sherry, who also received irESA (because only one member of a couple can be entitled to irESA). Jane continued to receive national insurance credits for LCWRA, because she had not been subsequently reassessed and found to be fit for work.

In 2022, Jane and Sherry separate and Jane claims UC. Jane contacts the DWP to explain that reg 21 should apply, so she should have LCWRA automatically for UC without needing to undergo a new WCA. She should also receive the LCWRA element from the first UC assessment period. The DWP may reassess Jane to determine whether she still has LCWRA.

It is important to remember that reg 21 will not be available in all cases. In A’s case, her ESA award ended but she had never been found not to have LCW. However, if A herself had been working, and had worked in excess of the permitted work rules for ESA, then she would have been determined not to have LCW for ESA. This is a basic condition of entitlement to ESA and therefore to national insurance credits on the basis of LCW. If that had been the case, then A would not have been able to benefit from reg 21 on a UC claim, because she would not have satisfied the basic condition of having LCW in order to qualify for the NI credits.

Moreover, because reg 21 specifically requires the determination of LCW or LCWRA to relate to old style ESA⁶ and no new claims for old style ESA are possible, it is possible that any new claims for credits on the basis of LCW are claims for credits for the purposes of new style ESA meaning that reg 21 may not apply in such cases. This is uncertain.

Finally, reg 21 would not appear to help a client who is over pension age, because under reg 3 of the Credits Regs, a person who has reached pension age is not able to qualify for credits. Moreover, they would not satisfy the conditions of reg 8B, because they would not qualify for ESA due to their age. Instead, claimants receiving old style ESA who are approaching pension age and who will need to claim UC (for example, a client whose partner is under pension age and who cannot qualify for pension credit) should make sure they claim UC whilst they are still entitled to ESA in order for reg 19 to apply.

If a client has previously had an award of old style ESA, either income-related or contribution-based, it is important to check why that award ended because reg 21 may mean that the client is entitled to a greater amount of UC as soon as they claim, and without the need to undergo the WCA first (although the DWP may reassess a client at any time.⁷

Citizens Advice advisers can contact the Expert Advice Team.

Lawrence Barratt is a Help to Claim Expert in the Expert Advice Team

The information in this article is correct as of the date of publication.

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Endnotes

¹ In most cases, only the LCWRA element is now available in new UC claims due to the abolition of the LCW element in April 2017. Certain UC claimants can also be treated as having LCW or LCWRA automatically due to their health condition or certain treatments

² Schedule 1, paragraph 6(1)(f) of the Welfare Reform Act 2007

³ Regulations 28(3) & 28(4)(b) of the Universal Credit Regulations 2013 (“the UC Regs”)

⁴ Reg 28(5)(a) of the UC Regs

⁵ Reg 28(5)(b) of the UC Regs

⁶ Regs 21(3) and 21(4) of the UC Regs

⁷ Reg 41 of the UC Regs