UK Social Security and Child Support Commissioners' Decisions

 


CIS/1775/2007

DECISION OF THE SOCIAL SECURITY COMMISSIONER
1. This supported appeal, which is brought with the leave of a commissioner, is allowed. I set aside the decision of the Burnley Appeal Tribunal dated 1 February 2007 and I remit the case to be reheard by a new tribunal in accordance with the directions given below.
2. The claimant received income support from 20 December 1999 until 6 April 2005, when the award was terminated following an investigation. The claimant was found to have had capital in excess of the prescribed amount. She had inherited £43,672.54 from her mother. The evidence shows that she had received a first payment in respect of this inheritance on 31 July 2003 (file, p.18), that by 6 May 2004 she had received £12747.64 (p.14) with the balance being held at her request by the executor until she requested payment, and that by 20 April 2005 she had received all but £11541.50, which was still held by the executor on her behalf. The dates of the various payments to her up to that time are set out (file, p.15).
3. By a decision dated 18 June 2005 (p.20), a decision maker found that the estate was finalised on 11 May 2004 and that from that date she had no entitlement to income support because she had capital in excess of £8000, and that an overpayment needed to be calculated from that date. Before that date, the decision maker found that the capital in her bank account did not go above £3000 in any one week.
4. It appears that the claimant had also been receiving housing benefit of £52.20 per week, and presumably also council tax benefit, which ceased from 6 February 2005. A decision also appears to have been made by the council that she had been overpaid £2286.21 housing benefit, which was to be recovered from ongoing benefit at the rate of £11.20 per week (p.106). I am unclear whether any repayments have been made or deducted from any benefit.
5. The statement at p.15 shows that she received £11747.64 prior to that date, with £2000 having been received on 7 April 2004 and £1000 having been received on 6 May 2004. The balance due to the claimant at 11 May 2004 would therefore have been £31,924.90. This was not all paid to her at once, and it is unclear whether it was invested by the executor to earn interest for her benefit.
6. In September 2005, she appears to have been treated as making a fresh application for income support. She explained that she had spent her inheritance, and had only £2952.06 capital left. A breakdown was sought of how she had spent the money (p.21). She explained that she had two box files of receipts (p.22), which she appears to have delivered to the benefits office in November 2005 (p.23). She has provided a 3 page list of items she bought with the inheritance, including household items for her home, insurance payments, holiday cruises, bingo, clothes said to be needed as a result of weight changes, paying off her daughter's debts and gifts (pp.27-29). She also produced bank statements showing receipts and expenditure from just before the first receipt of £1000 on 31 July 2003. She also explained (p.29) that when her mother was alive she used to help both her and her daughter if they were struggling.
7. On 28 February 2006, a decision maker decided (pp.97-98) that she had spent the inheritance as she claimed, and went on to consider whether she had deprived herself of it for the purpose of retaining her entitlement to income support. The decision maker found that the claimant's brother, her mother's executor, had given her the inheritance in instalments of no more than £3000, which was said to show that the claimant was aware of the capital rules and did not want the capital to show in her accounts. I note that that is not entirely accurate, as one payment was of £3500 and left her with nearly £4000 in one account.
8. The decision maker further considered that the claimant did not need the money for general living expenses as she was receiving benefit, and that her spending the money regardless of the fact that her benefit had ceased and making a further claim as soon as there was less than £3000 left showed that it was her intention to continue to live off benefit once the capital had depleted and reinforced the fact that she was aware of the capital rules. On that basis, and based on her income support entitlement, the decision maker concluded that she had deprived herself of the money received for the purpose of gaining entitlement to income support, apart from £200 per week in the 21 weeks since her income support had ceased, when she would have spent £200 per week on general living expenses, including rent and council tax. After allowing for that expenditure, the amount of notional capital at the date of her claim was determined as £36,520.48.
9. That decision was reviewed but not revised on 26 September 2006. This followed an appeal by the claimant on the ground that she did not deprive herself of capital in order to retain entitlement to benefits. She stated:

"I had been on the sick for a number of years and when the money came from my mother's estate I was able to furnish my home, treat myself and my family in the way that I wanted to because I knew that I would never have the chance again. I would have spent the money in the way that I did regardless of whether I had any benefits paid or not. The money was rationed to me in smaller lumps because was wary of spending it all which I would have done if I'd had it all, because I'm not very good at budgeting."

10. In written evidence to the tribunal (p.112-119), the claimant explained that she had had many bereavements in a very short time and had been drinking heavily and having health problems, and had been seriously depressed. She had also unexpectedly become pregnant and had had further serious problems because of that. Medical evidence was also submitted to support her (p.120).
11. The representations to the tribunal were that there were catalogue debts prior to the inheritance as appeared from the two box files of receipts (p.122). There was also evidence from the claimant's brother as to her inability to budget wisely. He had decided that her house needed to be done up but left it to her to decide what to do.
12. The tribunal concluded that the fact that the claimants' brother paid the whole of the balance of the inheritance to the claimant once the DWP became aware of the inheritance indicated that he was not motivated, as he claimed, by a desire to prevent the claimant from spending the money, but that it had been rationed to keep the claimant's money below the prescribed limit for income support purposes, and that it was satisfied that the claimant was aware of the capital limit. It therefore found that the claimant had notional capital of £36,520.48 at the date of her claim, which it found to be 15 September 2005.
13. The claimant sought leave to appeal on the basis that the tribunal had failed to take adequate account of her previous and ongoing difficulty with budgeting and managing money and drew attention to the evidence before the tribunal as to her financial problems and her drinking. She also stated that she had had the balance of the inheritance paid to her because she had been instructed to do so by the DWP's investigating officer.
14. It is unnecessary for me to come to any decision whether the tribunal's assessment of her motives involved any error of law, because for the reasons identified by Commissioner Mesher in granting leave to appeal, and by the representative of the secretary of state on this appeal, I have come to the clear conclusion that the tribunal was in error of law in its approach to her use of the capital to pay off debts and had failed to distinguish between her actions and purposes and those of her brother in considering her motive for what she did. In addition, there appears to me to be a distinction between concealing the inheritance to ensure the continuation of income support, which may have led to an overpayment decision in relation to the earlier award of income support and did lead to one in relation to housing benefit, and the motivation behind the spending of all or part of the inheritance. They need not be the same.
15. It appears to me that before the tribunal can make findings as to the claimant's motives in spending the money, it needs to consider what she spent the money on and when she spent it. On the finding of the decision maker on 18 June 2005 (p.20) the estate was only finalised on 11 May 2004 and it was only at that time that she became entitled to payment of her inheritance, although there had been some interim distributions before that time. Had the decision maker considered that she had intentionally deprived herself of the interim distributions for the purpose of securing entitlement to income support, she would have come to a different decision from that set out at p.20 of the file. The tribunal has concluded, however, without giving any reasons, that her spending of that money on whatever it was spent on, which it also does not appear to have considered, was for the purpose of preserving her entitlement to income support.
16. Further, the claimant herself stated in her written submissions that her mother used to help her when she was still alive, and, as I understand her statement, that her mother had been planning a cruise for the family before she died. The bank statements suggest that over £3000 was spent in August 2003 on a holiday, which may well have been the cruise her mother had been planning for her. This payment was made on the day following the receipt from the estate of £3500. Whatever the motivation behind other expenditure, it appears to me that if her account is believed that her mother had been planning a trip, then it may be perfectly credible that the claimant was simply using the mother's money for that trip without any consideration whatsoever as to the effect on her entitlement to income support. If her mother used to provide her with financial help before she died, it could be reasonable, in effect, to use the inheritance to replace that financial help.
17. There has also been no consideration as to the extent of any pre-existing indebtedness of the claimant which she could understandably have paid off using part of her inheritance.
18. Further, there was evidence that the claimant's home may have been short of reasonable quality furniture, fittings and equipment. Again, it could be perfectly reasonable for the claimant to spend a reasonable amount improving poor living conditions; it could be reasonable to pay off her daughter's debts to help her; it could be reasonable to acquire a pet and pay for pet food; it could be reasonable to buy gifts for family members or friends that could not otherwise have been afforded. If the claimant began drinking heavily, or more heavily, after her mother's death, or gambled money at bingo, because of her emotional state, that could well have happened regardless of whether it had any effect on her eligibility for income support.
19. The decision of the decision maker, affirmed by the tribunal, appears to be that a claimant is to be expected to spend all of an inheritance purely in paying for living expenses which had previously been covered by income support, housing benefit and council tax benefit. While a beneficiary under a will must not spend the money on the basis that if it is kept entitlement to income support will be lost or reduced, all the facts, and the reasons for the various items of expenditure have to be examined to see what, if anything, was spent in circumstances in which the forbidden purpose was a significant operative purpose (see R(SB) 40/85, para.10), and what would have been spent anyway on receipt of a windfall by somebody who had previously lived in relatively straightened circumstances. The test is a subjective one – see R(H) 1/06, where it was pointed out at paragraph 13 that

"It does not in my view adequately address or answer the point to say … that, because a person is not completely incapable of managing his affairs or of realising he was spending his money imprudently, it follows as a matter of course and without further analysis that all such spending is done for the purpose of securing entitlement to benefit. Such a jump is impermissible as it omits any real consideration of the actual purpose of the particular person involved."

20. Where an inheritance is spent over more than two years in many different ways, it is not possible, as the tribunal has done, to deal with all payments as being made with the same motivation, without looking at the different types of expenditure and the alleged reasons for them and coming to a conclusion in relation to each as to the significant operative purposes for which such expenditure was made. It is more than likely that at least some of the expenditure in question would have been incurred regardless of its effect on entitlement to income support. What the tribunal needs to look for is expenditure that, on the particular facts of this case, and taking into account the emotional state and budgeting capabilities of the claimant, would probably not have been made by her unless a significant motivation for it was to deprive herself of capital for the purpose of claiming income support or increasing the amount of that benefit.
21. In addition, if the tribunal concludes that all or part of the expenditure was with a significant operative purpose of securing or increasing entitlement to income support, then it must also determine the amount by which the resulting notional capital is to be treated as diminishing over the weeks and years. In assessing this as £200 per week over the weeks between 21 April 2005 and the date of the claim, the decision maker stated that that it related to general living expenses including rent and council tax. However, the effect of regulation 51A(1)(b) and (3) of the Income Support (General) Regulations is that the notional capital is to be treated as reducing each week by the amount of income support, housing benefit and council tax benefit the claimant would have been entitled to if she had not had the notional capital over that period. There does not appear to have been any attempt to assess this accurately by the decision maker. This is understandable as the amount of notional capital determined by the decision maker was so great that an accurate determination would have had no effect upon the decision. However, in my judgment, the new tribunal must determine the correct figures in accordance with regulation 51A or, if no determination could affect entitlement, it should leave it at large, on the basis that the precise figure could not affect its decision. It should not use an arbitrary figure calculated in the manner used by the decision maker.
22. The appeal is allowed and I give the decision set out in paragraph 1.

(signed on the original) Michael Mark

Deputy Commissioner

4 October 2007