Record of amendments. Amendment 9

Transcription

1 Record of amendments Amendment 9 To: Subject: Content: Action: All holders of the Housing Benefit/Council Tax Benefit Subsidy Guidance Manual Amendment 9 to the Housing Benefit/Council Tax Benefit Subsidy Guidance Manual This amendment gives details of the subsidy arrangements for the relevant year This is a full reprint of the. It is being published online, on the GOV.UK website, The first year for which this manual should be used when claiming subsidy is 2013/14 and is referred to in this manual as the relevant year DWP February 2014 Amdt 9 March 2014

2 Housing Benefit and Council Tax Benefit Subsidy Guidance Manual 2005 HB/CTB Performance Standards March 2014

3 Record of amendments Record of amendments 1 Amendments are serially numbered so that holders can check they have received the full series. 2 Incorporate amendments immediately and record that you have done so below. Serial number Initials Date Serial number Initials Date 1 Incorporated Dec Incorporated Oct Incorporated Feb Incorporated Apr Incorporated May Incorporated Feb Incorporated Mar Incorporated Mar Incorporated Mar Amdt 9 March 2014

4 Contents Abbreviations BRMA Broad Rental Market CRR Claim Related Rent CTB Council Tax Benefit DRI Disproportionate Rent Increase DWP Department for Work and Pensions EPCS Expenditure, Protective and Cultural Services HA Housing Association HAL Housing Association Leasing HAMA Housing Association Managing Agents HAT Housing Action Trust HB Housing Benefit HBMS Housing Benefit Matching Service HBSD Housing Benefit Security Division HMRC Her Majesty s Revenue and Customs HRA Housing Revenue Account IAD Information and Analysis Directorate IB Incapacity Benefit IOW In and Out of Work IRL Indicative Rent Level IS Income Support JSA(IB) Income-based Jobseeker s Allowance LA Local Authority LAA Local Authority Association LHA Local Housing Allowance LRR Local Reference Rent NAW National Assembly for Wales NINO National Insurance Number PoA Payment on Account RSL Registered Social Landlord SDA Severe Disablement Allowance STL Short-term Leased SRR Single Room Rent February 2014 Amdt 9

5 Contents About this manual Background 1 From 2010/11 the Subsidy Guidance Manual changed to a different format to previous editions. 2 In the past each edition was written for a specific year. This edition is generic and can be used for any year from 2010/11 until further notice and within this manual the relevant year means the year for which subsidy is being claimed. 3 Some parts of the manual do refer to a specific year, for example, Appendix A, and this is noted. 4 In the future the only parts of the manual that will be updated will be those where there has been a change in policy or there is a need to refer to a specific year. 5 The Subsidy Guidance Manual amendments will be available on the GOV website at What this manual contains 6 This manual details the subsidies the Department for Work and Pensions (DWP) will pay Local Authorities (LAs) for certain costs of the Housing Benefit (HB) and Council Tax Benefit (CTB) schemes. 7 This guidance covers subsidies for benefit costs administration costs 8 This manual is also supported by a key word index Cross references several appendices 9 Whenever possible all main guidance for a particular issue is contained in the same section. Sometimes you will be referred to another part of the manual or another document for further related information, rather than repeating that same information. 10 The following cross reference terms are used see Further applications for Rent Officer determinations earlier/later in this section, as appropriate, for information that is in the same section see Further applications for Rent Officer determinations earlier/later in this manual, as appropriate, for information that is in a different section

6 Contents Language of the manual 11 Some ordinary words and phrases have been used within the manual with a specific meaning to aid ease of reading and understanding. These words and phrases are Queries you is used to mean the person within the local authority making the decision home or accommodation is used rather than dwelling they occupy as their home authority or authorities is used to denote authorities responsibilities especially if talking about the administration arrangements within an authority 12 If you have any queries concerning the content of this manual, contact details are given at the end of each subject February 2014 Amdt 9

7 Contents Contents Section 1: Introduction Subsidy legislation Section 2: Benefit costs Benefit costs Qualifying expenditure Queries Section 3: Backdating Backdated claims Completion of the subsidy claim form Claims from persons of Pension Credit age Working age men aged Queries Section 4: Overpayments Overpaid benefit The treatment of overpayments on the subsidy claim form Current year overpayments Prior year overpayments LA error/admin delay thresholds Backdated payments and overpayments Underlying entitlement Calculating change of address overpayments Netting spanning two financial years HB paid to Crown tenants Duplicate payments Queries...490

8 Contents Section 5: Disproportionate rent increase rule (Scottish and Welsh authorities only) Disproportionate increases in rents rebated through HB Exemption categories Category (A) open and transparent rent-setting policies Category (B) rents increased by a common percentage The DRI calculation Definitions Queries Section 6: Temporary accommodation Subsidy rules from April Scope of the revised scheme Subsidy changes applicable from 1 April Subsidy under the scheme Upper subsidy caps Self contained accommodation The LHA rate for the size of the property Number of bedrooms Subsidy for board and lodging (B&B) and non self-contained (licensed) accommodation Subsidy for leased and other self-contained (licensed) accommodation Claiming subsidy Audit requirements Queries February 2014 Amdt 9

9 Contents Section 7: Rent allowances Introduction Rent allowance cases Regulated tenancies Subsidy and regulated tenancies The eligible rent the pre-1996 rules (old scheme cases) Continuously entitled to benefit Exempt accommodation Calculation of subsidy in pre-1996 cases Rates of subsidy for pre-1996 cases Maximum rent cases (new scheme cases) Subsidy in maximum rent cases Registered Social Landlord cases Rent officer referrals in respect of RSL tenancies Subsidy in RSL cases Local Housing Allowance cases Cases exempt from the LHA rules Subsidy in LHA cases Referral to the rent officer Referral to the officer in certain Housing Association schemes Further applications for rent officer determinations Re-determinations Supply of rent officer information to claimants Failure to refer relevant cases to the rent officer Transfer of housing authority stock to the private sector Representative cases in hostels Hostel cases tenancies entered into before 2/15 January Joint tenancies Sub-tenancies Payments on account and indicative rent levels (IRL) Overpayment recovery action Subsidy in payment on account and IRL cases Queries

10 Contents Section 8: Expenditure not to be included as qualifying expenditure because it does not attract subsidy Introduction Differential rent schemes (The modular improvement rule) Rent-free weeks and credits Awards to tenants Prior year overpayments Recovered overpayments resulting from payments on account Uncashed payments of HB and CTB Queries Modified schemes Benefit awards to war pensioners or war widows/widowers Additional subsidies to LAs operating a discretionary local scheme Queries Section 9: Rent rebate subsidy limitation Introduction Data collection Rent rebate subsidy limitation calculations for LAs in England Subsidy limitation rent calculation Average weekly rent (Q) Definition of a dwelling Average weekle rent calculation Amount of deduction from subsidy Rent rebate subsidy limitation calculations for LAs in Wales Calculation of Q Amount of deduction Legislation Derogations Queries February 2014 Amdt 9

11 Contents Section 10: Administration costs Introduction Details of the DWP Administration subsidy distribution in the relevant year Distribution methodology Details of the DWP additional administration subsidy distribution in the relevant year Payment of subsidy Queries Section 11: In-year instalments of subsidy and payments of subsidy In-year instalments of subsidy Payments of subsidy Queries Section 12: Extended payments of HB/CTB Extended payments Subsidy for extended payments Subsidy for overpayments of extended payments Queries Section 13: Expenditure attracting full rate subsidy not separately identified elsewhere on the claim form Introduction Cell 023 England and Wales Cell 023 Scotland Cell 061 England and Wales only Cell Cell Queries

12 Appendices Summary of 2013/14 benefit subsidy arrangements...appendix A Effective dates of rent officers determination...appendix B Subsidy arrangements for hostel accommodation... Appendix C Administration Subsidy distribution for 2013/14... Appendix D Weekly limit rents for LAs in England 2013/14...Appendix E Amounts for rent rebate subsidy deduction calculation for LAs in Wales 2013/ Appendix F Subsidy arrangements for Temporary Accommodation... Appendix G Amdt 9 March 2014

13 Section 1: Introduction Section 1: Introduction 100 The Department for Work and Pensions (DWP) is responsible for paying all subsidy in respect of rent rebate and rent allowance. With the abolition of Council Tax Benefit (CTB) from 1 April 2013, all subsidy including any adjustments for CTB also cease from the start of the 2013/14 year. 101 With the exception of certain areas of housing benefit spending whereby authorities have the most scope to monitor and control costs, subsidy is paid at the rate of 100%. The benefit subsidy arrangements require authorities to keep accurate records of benefit spending falling into the different categories required for subsidy purposes. Authorities need to maintain systems and records in such a way that the individual cases, which make up the benefit subsidy totals in each category, can be identified for verification of accounts and claims for internal audit and auditor certification purposes. Subsidy legislation 102 Until 1996/97, the HB/CTB subsidy arrangements for each financial year were provided for in the annual Housing Benefit and Council Tax Benefit (Subsidy) Order, which was made towards the end of the relevant financial year. 103 However, from 1997/98, the legislative vehicle for the subsidy arrangements is the Income-related Benefits (Subsidy to Authorities) Order 1998 SI 1998/562, which is amended as required to take account of any changes to the subsidy arrangements. The following Income-related Benefits (Subsidy to Authorities) Amendment Orders have updated the subsidy arrangements SI 1998/2865 SI 1999/550 SI 2000/1091 SI 2000/2340 SI 2001/2350 SI 2002/1859 SI 2002/3116 SI 2003/3179 SI 2004/646 SI 2005/369 SI 2005/535 SI 2006/54 SI 2006/559 SI 2007/26 SI 2007/731 SI 2008/196 SI 2008/695 SI 2008/1649

14 Section 1: Introduction (103)-199 (103) SI 2009/30 SI 2009/2564 SI 2009/2580 SI 2010/2481 SI 2010/2509 SI 2011/2957 SI 2013/266 SI 2013/ Separate detailed guidance is issued about the arrangements for claiming payments on account of subsidy and for making final subsidy claims. A brief summary is given in Section 11: In-year instalments of subsidy and payments of subsidy. 105 Authorities should note that amounts should be rounded to the nearest pound when claiming subsidy. Amounts of 50 pence or less should be rounded down; amounts of more than 50 pence should be rounded up. 106 This guidance should be read in conjunction with the Notes for guidance on completion accompanying final subsidy claim forms (MPF720A, B, or C, as appropriate) February 2014 Amdt 9

15 Section 2: Benefit costs Section 2: Benefit costs 200 The benefit subsidy arrangements set out in this guidance manual apply to all HB lawfully paid in the relevant year. They also apply to all overpayments and excess benefits identified in that period. 201 LAs receive, for the greater part of the qualifying benefit expenditure they incur, a direct subsidy of 100%. However, in areas of expenditure where authorities have most scope to monitor and control costs, lower rates apply. 202 The areas of benefit spending which attract a lower rate of subsidy are certain types of overpaid benefit, see Section 4, Overpayments, Overpaid benefit later in this manual duplicate payments, see Section 4, Overpayments, Duplicate payments later in this manual disproportionate increases in rents rebated through HB, see Section 5, Disproportionate rent increase rule later in this manual rent rebate payments above a specified level in respect of homeless people in board and lodging, licensed and short-term accommodation, see Section 6, Temporary accommodation later in this manual rent allowance paid above or without the required rent officer determination 203 See Section 4, Overpayments, Backdated payments and overpayments for details about the recording of backdated benefit that is subsequently found to have been overpaid Qualifying expenditure 210 'Qualifying expenditure is the total of Housing Benefit and Council Tax Benefit paid by an authority during the relevant financial year, subject to certain deductions. The deductions are modular improvement schemes (rent rebate only), unless the authority qualifies for exemption rent free weeks and credits awards to tenants prior year overpayments including recovered Departmental error overpayments uncashed instruments of payment recovered payments on account which occurred in a previous year, and expenditure on modified schemes

16 Section 2: Benefit costs (211) The term paid should be taken to mean benefit lawfully awarded and paid or credited in relation to the relevant year even though physical payments of benefit made to claimants, by rent allowance or as a rebate, may not reflect actual benefit paid because of deductions from ongoing entitlement to recover overpayments or excess benefits Queries 220 If you have any queries concerning the content of this section, contact Andrew Curphey HB Delivery Division 6th Floor Caxton House Tothill Street London SW1H 9NA Tel: HBCTB.SUBSIDYQUERIES@DWP.GSI.GOV.UK February 2014 Amdt 9

17 Section 3: Backdating Section 3: Backdating Backdated claims 300 From 6 October 2008, subject to good cause having been demonstrated, a claim from a person of working age may be backdated for up to six months. Authorities should note the guidance in HB/CTB Circular A16/ For claims from persons of Pension Credit age, see paragraph 330 working age men aged 60 64, see paragraph The backdating rules for the period 1 April 2008 until 5 October 2008 are unchanged. 303 Subject to any particular conditions which might apply, eg thresholds and caps, the rate of subsidy for correctly paid backdated benefit is 100%. 304 The relevant regulations are the Housing Benefit Regulations 2006; regulation 83(12) Housing Benefit (Persons who have attained the qualifying age for state pension credit) Regulations 2006; regulation 64(1) Council Tax Benefit Regulation 2006; regulation 69(14) Council Tax Benefit (Persons who have attained the qualifying age for state pension credit) Regulations 2006; regulation 53(1ZA) Social Security (Miscellaneous Amendments) (No.4) Regulations 2008 Housing Benefit and Council Tax Benefit (Amendment)(No2) Regulations Subsidy is calculated on the total benefit backdated in the financial year. It is payable for the year in which the awards are made, even if the period for which benefit is backdated falls wholly or partially in the previous financial year. 306 Local authorities should be rigorous in establishing whether the criteria of continuous good cause in the backdating rules have been met. If these criteria have not been met, backdated benefit should not be paid. It is down to the individual authority s discretion to establish whether good cause has been proven. 307 Subsidy in backdated claims is subject to the external auditor s certification as per the relevant auditor certification instructions. 308 Local authorities must be able to demonstrate continuous good cause whenever backdated benefit is paid and must retain supporting evidence for audit purposes. If local authorities are unable to demonstrate continuous good cause, the DWP will deem the associated subsidy to have been overpaid.

18 Section 3: Backdating Backdated amounts are those in respect of a period prior to the effective date of the claim. Late-assessments of claims or latepayments in themselves do not constitute backdated awards Completion of the subsidy claim form 320 Backdated benefit should be treated in the same way as nonbackdated expenditure, ie included in the total expenditure cells of the form, ie cells 011, 055 (English/Welsh authorities only), 094 and 142 included in the relevant cell in each section of the form according to the type of payment made, and if subsequently found to be overpaid, must be treated as an overpayment rather than a backdated payment 321 Backdated benefit (excluding overpayments) must also be separately identified in cells 038, 077 (English/Welsh authorities only), 126 and 161. The purpose of these cells is to identify backdated expenditure so that relevant audit trails and assurance can be provided that expenditure has been properly incurred. 322 Local authorities should not consider backdating on a claim for benefit where a previous claim has already been received that still needs to be fully considered. Entitlement to benefit or a review of benefit should be made on the previous claim first, rather than backdating being considered on the new claim Claims from persons of Pension Credit age 330 From 6 October 2008 the time limits for claiming benefits changed for persons of Pension Credit age. 331 From this date the time limit for claiming benefit from persons of Pension Credit age is three months. 332 From 6 October 2008 a local authority may consider the start date of the claim from a person of Pension Credit age is up to three months before the date on which the person actually makes the claim. However, the benefit paid should be treated as normal Housing Benefit and not backdated expenditure. 333 Local authorities should refer to the advice in Circular A16/

19 Section 3: Backdating Working age men aged Men aged are working age customers, but are also entitled to claim Pension Credit. The following rules will apply to this group if the customer, or partner, is in receipt of Income Support (IS), incomebased Jobseeker's Allowance (JSA(IB)) or income-related Employment Support Allowance (ESA(IR)), the six month time limit for backdating HB/CTB applies. However the customer will need to show good cause for not claiming before neither the customer nor their partner receives any of these benefits, the three month time limit for making a claim for HB/CTB applies ie effectively a three month limit on backdating applies 341 Local authorities should refer to the guidance in Circular A16/ Queries 350 If you have any queries concerning the content of this section, please contact housing.benefitenquiries@dwp.gsi.gov.uk

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21 Section 4: Overpayments Section 4: Overpayments Overpaid benefit 400 The objective is to encourage LAs to seek to minimise overpayments, as defined by regulation 99 of the HB Regulations 2006, and to recover overpaid benefit wherever appropriate. HB Reg The rates of subsidy that apply to overpayments vary according to the circumstances in which they were made. i Eligible this category includes Claimant error, Fraud and Other overpayments. Claimant error this is an overpayment that has been caused by the claimant or a person acting on the claimant s behalf, failing to provide information or report a change of circumstances, in accordance with the regulations, and is not a fraudulent overpayment. Fraud this is an overpayment that has occurred after 31 March 1993, when the claimant has, in respect of the overpayment been found guilty of an offence admitted an offence in an interview under caution, or agreed to pay an administrative penalty. Other this is an overpayment, which does not fit into any of the other categories. Examples could be when an LA makes a payment in good faith, but a change, such as an adverse decision in a judicial review, results in an overpayment; or, an award of benefit does not take into account any income subsequently paid as arrears, for instance when a claimant s earnings increase retrospectively and they receive a lump sum payment of arrears or as a result of entitlement to another benefit commencing or increasing. This category of overpayment attracts subsidy at the rate of 40%. For further information, see HB/CTB Overpayments Guide, Classification and Recoverability chapter.

22 Section 4: Overpayments (401) (401) ii LA error this is an overpayment which has arisen from a mistake being made. This may be in the form of an act or omission made by the LA or someone acting on their behalf, for example when an LA miscalculates the amount of HB entitlement. This classification is not appropriate if the claimant, their appointee or agent, or the person to whom the benefit was paid, caused or materially contributed to the mistake, act or omission. iii Administrative (Admin) delay this is an overpayment arising when the LA is notified of a change of circumstances and has sufficient information and evidence to make a revision or supersession decision, and the LA does not make a decision on that change of circumstances or suspend the benefit before the claimant s next payday, and the delay was not due to a mistake, whether in the form of an act or omission, made by the LA or someone acting on their behalf, and the delay was not caused or contributed to by the claimant, a person acting on the claimant s behalf, or any other person to whom the benefit was paid. When all of the information needed to process a change of circumstances that would reduce a claimant s HB entitlement is received, the LA must action it before the claimant s next payday. If it is not actioned before the next payday, any overpayment from the first day of the benefit week following receipt of all of the information should be classified as LA official error or Admin delay (depending on whether the delay was caused by a mistake, in the form of an act or omission). The subsidy for LA errors and Admin delays are determined by thresholds and may be nil, 40% or 100% subsidy, see LA error/admin delay thresholds later in this section. iv Technical overpayment this type of overpayment arises as a result of rent rebate being awarded and the rental liability ceasing or reducing, subsequent to the award, which therefore eliminates or reduces entitlement to that rent rebate. The Technical overpayment begins on the day the rental liability ceases or reduces February 2014 Amdt 9

23 Section 4: Overpayments (401) This category of overpayment is ineligible for subsidy. (401) v Payment on Account (PoA) overpayment this type of overpayment arises because a PoA was made, which the claimant was not entitled to. It is eligible for 100% subsidy, see paragraph 408. ix vi Recovered PoA overpayment this type of overpayment arises because a PoA was made, which the claimant was not entitled to, but it has been recovered. It is ineligible for subsidy. vii Duplicate overpayment this type of overpayment arises from a duplicate payment following alleged non-receipt, loss, theft or destruction in cases where the original payment has been cashed. It is eligible for 25% subsidy. See Duplicate overpayments later in this section. viii Departmental error this type of overpayment arises from a mistake, whether in the form of an act or omission, made by an officer of the DWP or Her Majesty s Revenue and Customs (HMRC). This classification is not appropriate if the claimant, their appointee or agent, or the person to whom the benefit was paid, caused or materially contributed to the mistake, act or omission. Such overpayments can occur, for example, on initial processing of claims, eg incorrect local office assessment of Income Support (IS) entitlement or incorrect notice of entitlement to the authority. This category of overpayments is eligible for 100% subsidy, see paragraph 408. Recovered Departmental error this type of overpayment arises from mistake whether in the form of an act or omission made by an officer of the DWP or HMRC, but it has been recovered. This category of overpayment is ineligible for subsidy.

24 Section 4: Overpayments It is not necessarily a Departmental error if the DWP fails to pass information on to LAs regarding changes in the claimant s circumstances. This is because the claimant has a duty to report any changes that may affect their entitlement to HB to the LA that administers their benefit. Even if a claimant has notified the DWP of a change, they still have a duty to report it to the LA. 403 An overpayment arising after the DWP has notified the LA may be classified as LA error or Admin delay, because once the LA is aware of a change they are expected to act on it. However, this will all depend on the information that is sent by the DWP. If further information is still needed from the claimant, they are still contributing to the overpayment and therefore the overpayment would be classified as Claimant error. 404 There are however exceptions to the regulations that stipulate that a claimant must notify the LA of a change of circumstances, eg In and Out of Work (IOW) Processes and claimants who are also in receipt of Pension Credit. For further information, see HB/CTB Overpayments Guide, Classification and recoverability chapter. 405 Subsidy on overpaid benefit in categories i-ix of paragraph 401 is payable on the total amounts of overpaid benefit identified by the authority within the financial year. Authorities will not be required to deduct from their claim in that year or refund in subsequent years any amount of overpaid benefit which is later recovered, with the exception of certain Departmental error overpayments and overpayments arising from making a PoA, see paragraph It should be noted that subsidy is claimed on netted overpayments calculated in accordance with regulations 104 and 104A of the HB Regulations For further information, see Underlying Entitlement and Calculating change of address overpayments later in this section 407 In common with LA error overpayments, benefit overpaid as a result of Departmental error is only recoverable when the claimant or person to whom benefit was paid could reasonably have been expected to realise they were being overpaid at the time the overpayment occurred, see HBCTB Overpayments Guide, Classification & recoverability chapter. 408 Benefit overpaid because a PoA was made, which the claimant was not entitled to attracts 100% subsidy, but is recoverable. In both Departmental error and PoA overpayment cases, 100% subsidy is payable on the amount of overpaid benefit less any amount which is recovered, ie not necessarily on the amount which is originally identified. When an amount is recovered in the current year and the overpayment was identified in an earlier year, the amount recovered in the current year should be deducted from total benefit expenditure in the current year February 2014 Amdt 9

25 Section 4: Overpayments The treatment of overpayments on the subsidy claim form 420 From 2008/09, the subsidy claim form (MPF720A, B or C as appropriate) records overpayments in a new way, ie according to whether the overpayments relate to the current year or prior years. Current year overpayments 421 Current year overpayments are those identified in the year relating to benefit paid in the year (including benefit paid in the year in respect of an earlier year). 422 They should be recorded in the appropriate total expenditure cells and the following overpayment/excess benefit cells 024 to 028 (non HRA rent rebate in England and Wales; all rent rebates in Scotland) 062 to 066 (HRA rent rebate in England and Wales), or 106 to 112 (rent allowance) Prior year overpayments 423 Prior year overpayments are those identified in the year relating to benefit paid in an earlier year. 424 They should be recorded in cells to 033 (non HRA rent rebate in England and Wales: all rent rebates in Scotland) 068 to 072 (HRA rent rebate in England and Wales) 118 to 124 (rent allowance), or Example Prior year overpayments should not be recorded on the total expenditure cells of in the current year s claim. 100 is paid in an Old Scheme rent allowance case and is recorded in cell 102 (expenditure on that part of the weekly eligible rent at or below the rent officer s determination on a claim) of the previous year s subsidy claim. In the current year it is discovered that 40 of the 100 paid was an eligible overpayment. 40 should be recorded in cell 121 (eligible overpayments from a prior year) of the current year s claim. This will ensure that the 40 correctly attracts 40% subsidy. The calculation at cell 125s ensures the subsidy claimed in the previous year is adjusted.

26 Section 4: Overpayments LA error/admin delay thresholds 430 An initiative was introduced from April 2004 to allow LAs to receive subsidy according to the level of their LA error overpayments when compared to the total amount of correct benefit payments they make. This now includes Admin delay overpayments. 431 The level of subsidy that LAs may claim for LA error and Admin delay overpayments is determined by thresholds, expressed as a percentage of total correct payments. The thresholds are Lower threshold 0.48% Upper threshold 0.54% Where the LA error/admin delay overpayments are Subsidy rate for the total LA error/admin delay overpayments less than or equal to 0.48% of the expenditure 100% attracting 100% subsidy greater than 0.48% but less than or equal to 0.54% of the 40% expenditure attracting 100% subsidy greater than 0.54% of the expenditure attracting 100% subsidy 432 For the calculation of the percentage LA error/admin delay, correct payments are defined as payments for which full (100%) subsidy is payable. This includes Rent Rebates, non-hra Rent Rebates and Rent Allowances and incorporates any backdating that has been properly undertaken. 433 LA error overpayments are only recoverable if the claimant, or their representative, could reasonably have been expected to realise they were being overpaid. Under these circumstances, LAs entitled to subsidy for LA error overpayments will keep any amount recovered without any loss of subsidy nil HB Reg 100(2) February 2014 Amdt 9

27 Section 4: Overpayments Backdated payments and overpayments 440 Backdated payments are sometimes found subsequently to have been overpayments. From April 2004 all backdated payments which are later found to have been overpayments should be recorded, for subsidy purposes, as the appropriate type of overpayment. 441 The mechanics of the claim form will effect the deduction of the full amount of overpaid benefit from the total benefit expenditure figure. In the case of Departmental error overpayments, the figure to be deducted will be the amount of any Departmental error overpayments recovered in the financial year. 442 Authorities should include the whole amount of overpaid benefit identified in the current year relating to both the current and any previous year(s) in the figure for total overpaid benefit under the relevant overpayments category, eg LA error, so that the appropriate rate of subsidy can be claimed. 443 It will often be the case that a portion of the overpaid benefit identified in the year of the subsidy claim (year A) was in fact paid in a previous financial year (year B) and has already attracted subsidy. Authorities should identify the correct overpayment category and claim the appropriate rate of subsidy for the year in which the subsidy claim is made (year A) Underlying entitlement 450 Regulations state that in calculating the amount of a recoverable overpayment, you must take account of any underlying benefit entitlement that existed throughout the period of the overpayment. HB Reg When overpayments have occurred, the overpayment equals the difference between the benefit already paid and any underlying entitlement. Subsidy should be claimed on the overpayment at the appropriate rate. In some cases this will be nil. The underlying benefit entitlement will attract subsidy at the rate claimed for correct benefit payments (100%). 452 As a general principle, subsidy is not payable twice in respect of the same expenditure over the same period. When an overpayment has arisen and benefit is subsequently awarded for the same period, subsidy in respect of the overpayment should only be claimed on the net overpayment. 453 The following examples assume no other relevant factors are involved.

28 Section 4: Overpayments (453) Example 1 A claimant is in receipt of 100 HB a week. The LA is then informed that the claimant started full-time work two months ago. Underlying entitlement is considered, but the LA establishes that the claimant would not have been entitled to any HB for the period of the overpayment. The overpayment is therefore 100 a week, which has been classified as Fraud error. The subsidy that should be claimed is Subsidy Underlying Entitlement = Nil Nil Overpayment Amount = % of 100 = 40 Total Subsidy = 40 per week Example 2 A claimant is in receipt of 100 HB a week. The LA is then informed that the claimant started work two months ago. Underlying entitlement is considered and it is discovered that the claimant would have been entitled to 50 HB a week. There is an overpayment of 50 a week, which has been classified as Claimant error. The subsidy that should be claimed is Subsidy Underlying entitlement = % of 50 = Overpayment amount = 50 40% of 50 = Total Subsidy = per week Note: When completing the final subsidy claim form, fraud and claimant error overpayments are to be entered in the appropriate Eligible overpayment cell. Example 3 A claimant is in receipt of 100 HB a week. The claimant informs the LA that he is starting work the following week. The LA does not action the change of circumstances so there is an overpayment. Underlying entitlement is considered and it is discovered that the claimant would have been entitled to 25 HB a week. The overpayment is 75 per week and is classified as LA error. The subsidy that should be claimed is Subsidy Underlying Entitlement = % of 25 = Overpayment Amount = 75 Nil due to LA error = Nil * Total Subsidy = February 2014 Amdt 9

29 Section 4: Overpayments (453)-457 * The LA error overpayment may attract subsidy under the LA error threshold scheme. However, for illustrative purposes this is omitted from this example. Calculating change of address overpayments 454 The HB regulations were amended from 1 April 2010, with regards to calculating overpayments when a claimant has changed address within the same LA s area. An LA should offset the HB entitlement at the new address against the overpayment from the previous property, thereby reducing the overpayment to nil in the majority of cases. However, the HB must have been payable to the same person (claimant, claimant s representative or landlord/agent), in respect of both dwellings, for the provisions to be applied. 455 The overpayment should be reduced by the entitlement at the new address in every case when the criteria listed in HB Regulation (Reg) 104A ((SPC) Reg 85A) are satisfied. However, if it is decided that it would not be in the claimant s best interests to apply the offset, for example because it would cause severe hardship for the claimant, HB could be paid again for the same period. A record of the decision to pay HB when the offset could have been applied would need to be kept in order for the LA to claim subsidy for both the overpayment and the HB entitlement at the new address, covering the same period. 456 An offset cannot be applied to cases when the HB is paid to different people at the old and new addresses, for example when it is paid direct to the landlord at the previous property and is then paid to a different landlord at the new address, or when it is paid to the landlord at the previous property and is then paid to the claimant at the new address. This is to ensure that the claimant is not put into rent arrears at their new address. 457 An offset cannot be applied to cases when the claimant and partner swap who is claiming the HB, when they have changed address. This is because the claimant and partner s HB claims are two different claims for benefit. HB from one claim cannot be offset against an overpayment from another claim. The overpayment would have to be recovered by making weekly deductions from ongoing HB entitlement.

30 Section 4: Overpayments An offset cannot be applied when the previous property was being paid as a rent rebate, as the claimant cannot use the benefit credited to the rent account to pay their rent at the new address. See HB/CTB Overpayments Guide, Calculation of overpayments chapter. Netting spanning two financial years 459 For netting that spans more than one year, it will be necessary to adjust the current subsidy claim to reflect the amount of subsidy already claimed in a previous year. This could occur where an overpayment on review is subsequently found to be i ii correctly paid, or a backdated payment 460 As correctly paid and backdated payments attract 100% subsidy from April 2004, an overpayment that is subsequently found to be either correctly paid or backdated can be treated, for subsidy purposes, as shown in the example below. In the previous year the reduced rate of subsidy applicable to the category of overpayment will have been claimed. On review in the subsequent year the balance of subsidy up to 100%, will need to be included in the subsidy claim. 461 In the case of paragraph 459 i and ii, to claim the shortfall in subsidy it will be necessary to reduce the appropriate overpayment cell in the current subsidy claim by the amount that was previously claimed as an overpayment, but which is now found to be correctly paid (or backdated) and eligible for 100% subsidy Example Overpayment of 100 rent allowance identified in a previous year and 40% subsidy claimed. In the current year 75 of the overpayment is found to be correctly paid (as a normal payment or a backdated payment), and eligible for 100% subsidy. The appropriate overpayment cell is reduced by 75. The mechanics of the claim form are such that this will result in the shortfall in subsidy between the 40% already claimed and 100% being included in the overall subsidy total. Note: There are unlikely to be instances when an overpayment previously categorised as fraudulent is subsequently found to have been correctly paid, or a backdated payment. February 2014 Amdt 9

31 Section 4: Overpayments (453)-457 HB paid to Crown tenants 470 HB should not be awarded in cases when the landlord s interest is held by a Government department. These cases are Crown tenancies and HB is not legally payable. HB paid erroneously to Crown tenants should be classified as an overpayment. The appropriate rate of subsidy depends on the kind of overpayment it is Duplicate payments 480 Duplicate payments attract a lower rate of subsidy in cases when the original instrument has been, or is subsequently, encashed. Duplicate payments can be made following i ii iii iv alleged non-receipt loss theft destruction of an instrument of payment 481 In such cases, subsidy on the duplicate payment is payable at 25%, the original payment attracts subsidy at the appropriate rate. There may be cases when a duplicate payment is issued and the original instrument is found to be uncashed. Uncashed payments do not receive subsidy, see Section 8: Uncashed payments of HB and CTB later in this manual. 482 LAs should ensure that, when a duplicate payment has been issued and the original is found to be uncashed, subsidy at the appropriate rate is claimed on the amount once only Queries 490 If you have any queries concerning the content of this section, contact HBandCTB.overpayments@dwp.gsi.gov.uk

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33 Section 5: Disproportionate rent increase rule (Scottish and Welsh authorities only) Section 5: Disproportionate rent increase rule (Scottish and Welsh authorities only) Disproportionate increases in rents rebated through HB Note: These paragraphs relate only to Scottish and Welsh authorities. 500 This subsidy control is intended to discourage LAs from loading rent increases onto council tenants to unfairly generate increased subsidy income. An LA can gain exemption if it can convince its auditors that it meets one of the following criteria a b the LA has not deliberately targeted rent increases at tenants getting HB the LAs rents during the year in question have increased by a common percentage with no subsidy deduction having been incurred in the previous year 501 LAs that do not qualify for exemption must carry out a calculation that involves an in-year comparison of council rent increases and the input of the prior year s Disproportionate Rent Increase (DRI) penalty figure. The DRI calculation excludes rents and expenditure in respect of homeless people in bed and breakfast and short-term leased and licensed accommodation Exemption categories 510 Authorities can gain exemption from the DRI rule in one of two ways.

34 Section 5: Disproportionate rent increase rule (Scottish and Welsh authorities only) Category (A) open and transparent rent-setting policies 511 The authority must satisfy all the following criteria a b c for the relevant year the LA has set rents and service charges according to the type, condition, class or description of the dwelling and any services, facilities or rights provided to the tenant, and for the relevant year the LA did not have regard to tenants real or potential HB status when setting its rents, and in the relevant year and the previous two years, the LA did not let properties attracting higher rents to tenants who were on rebates, or who were likely to become rebated, irrespective of their housing need Category (B) rents increased by a common percentage 512 The authority can also gain exemption from the DRI rule when both the following criteria apply a b there is clear evidence that rent increases between 31 March of the year before the relevant year and 31 March of the relevant year were the same percentage and applied on the same day for all tenants irrespective of their HB status, and no subsidy deduction was applicable under the DRI rule for the year before the relevant year. This should be tested after the final subsidy claim for that year has been settled 513 A crucial factor in gaining exemption from the DRI is the assessment of the external auditor. The onus is on the LA to provide the auditor with conclusive supporting information. If the auditor is not satisfied that an exemption is appropriate, but the LA has purported to have exempted itself from the DRI calculation, the auditor will suggest the authority amend its form and will qualify the subsidy claim if the authority will not do so. The LA will then be required to carry out the DRI calculation make any appropriate deduction from subsidy have this calculation audited February 2014 Amdt 9

35 Section 5: Disproportionate rent increase rule (Scottish and Welsh authorities only) The DRI calculation 520 An authority which does not qualify for exemption will be required to carry out a calculation based on the DRI abatement applied in the preceding year, multiplied by any new abatement arising from a disproportionate rent increase in the subsidy year itself. 521 The DRI calculation is as follows. A. The base for deductions To ensure parity for England, Wales and Scotland, the base to which the DRI deduction should be applied is Qualifying expenditure attributable to rent rebates only, that is Total rebates less nil deductions, eg modular improvements and awards to tenants amounts above rent rebate thresholds, less overpayments of rebates For the purposes of the DRI formula, the base to which any deduction should be applied is referred to as X. B. Calculation of the DRI deduction Y = (1 + E96) x C x F - 1 DRI deduction = Y x X a) C is determined by dividing B by A when A is the average rent charged by the authority on 31 March of year before the relevant year to tenants in Category 1 dwellings B is the average rent charged by the authority on 31 March of the relevant year to tenants in Category 1 dwellings continued

36 (521) b) F is determined by dividing D by E when Definitions D is the average rent charged by the authority on 31 March of the year before the relevant year to tenants in Category 2 dwellings E is the average rent charged by the authority on 31 March of the relevant year to tenants in Category 2 dwellings E96 is the proportion of HB qualifying expenditure that was attributable to the DRI under the Income-related (Subsidy to Authorities) Order 1998 for the year before the relevant year Y is the DRI reduction rate to be applied to HB qualifying expenditure less expenditure in the incentive areas 530 Category 1 dwellings means dwellings with tenants who were in receipt of rent rebate on 31 March of the year before the relevant year that were occupied on both 31 March of the year before the relevant year and 31 March of the relevant year. 531 Category 2 dwellings means dwellings with tenants who were not in receipt of rent rebate on 31 March of the year before the relevant year that were occupied on both 31 March of the year before the relevant year and 31 March of the relevant year. 532 If 31 March of the year before the relevant year or 31 March of the relevant year coincides with a rent-free period, then the rent taken into account for the purposes of calculating the average rent shall be that which applied immediately before the relevant rent-free period began. Example First component the in-year comparison Average rent on 31 March of the year before the relevant year for tenants in receipt of rent rebates Average rent on 31 March of relevant year for tenants tenants in receipt of rent rebates Average rent on 31 March of the year before the relevant year for tenants not in receipt of rent rebates Average rent on 31 March of the relevant year for tenants not in receipt of rent rebates Value of C = = 1.067

37 Section 5: Disproportionate rent increase rule (Scottish and Welsh authorities only) Value of F = = Value of C x F = Second component previous year s penalty Proportion of HB qualifying expenditure that was attributable to the DRI for the year before the relevant year: The calculation Y = ( ) x = Base for deductions = 1,500,000 DRI deduction = 1,500,000 x = 36,900 Should the calculation of Y produce a zero or a negative figure, no DRI deduction will apply. 533 Figures for total rent payable may be based on either eligible rent for HB purposes or rent actually payable if this is different and can be obtained more readily. Rates and water rates must be excluded in all cases. The same basis must be used for all dates Queries 540 If you have any queries concerning the content of this section, contact Andrew Curphey HB Delivery Division 6th Floor Caxton House Tothill Street London SW1H 9NA Tel: HBCTB.SUBSIDYQUERIES@DWP.GSI.GOV.UK

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39 Section 6: Temporary Accommodation Section 6: Temporary accommodation Subsidy rules from April For customers placed into non self-contained accommodation (board and lodging or licensed), HB subsidy will be limited to the one bedroom self-contained Local Housing Allowance (LHA) rate based on the location of the property. 601 For those in self-contained licensed and short-term lease accommodation, the maximum HB subsidy will be determined by using 90% of the LHA rate for the size of the property plus an element for management costs ( 60 per week for local authorities outside of London, 40 per week for authorities in London). 602 The rules affect how subsidy is claimed they do not alter how the HB entitlement is calculated. 603 Full details of the scheme are outlined below. The scope of the revised scheme 604 The revised subsidy scheme applies to all cases, existing and new, covered by the amended Articles 17 and 17A and new Articles 17B and 17C, from 1 April The revised heading for Article 17 reads Subsidy in respect of non self-contained licensed accommodation, and board and lodging accommodation, provided by an authority as temporary or short term accommodation Subsidy changes applicable from 1 April The provision to apply exemptions to the upper cap limit in exceptional cases has ceased 611 The LHA rates used in the formula to calculate subsidy are set at the January 2011 rates. The use of January 2011 LHA rates continues. 612 The relevant legislation for these changes is The Income-related Benefits (Subsidy to Authorities) (Temporary Accommodation) Amendment Order 2010 (SI 2010/2509). It was laid in Parliament on 18 October 2010.