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Chapter H1: Capital

Contents
Introduction
H1001:About the guidance
H1015:The law
Is the resource capital
H1020:What is capital
H1023:Capital payable by instalments
H1035:Rights to capital
H1050:When income becomes capital
Does the person own the capital
General
H1070:Ownership of capital
H1077:Ownership of capital of a child or young person
H1081:How a person gets a beneficial interest in capital

How to work out if a person is the beneficial owner of capital
H1090:The person is the legal owner
H1091:Written evidence
H1092:No beneficial interest in the capital or only a share in it
H1094:The legal owners use their money to get capital
H1097:The legal owners do not use their money to get capital
H1100:More guidance
Beneficial ownership in particular cases
H1120:About the guidance
Businesses and limited companies
H1130:Businesses
H1132:Limited companies
H1135:Bank, post office and building society accounts
H1140:Capital held by a solicitor
H1150:Gifts
H1169:Interest in the estate of a person who has died
Interest in a trust
H1180:When there is a trust
H1185:Trustees
H1190:Terms of a trust
H1195:Interest in a trust
H1205:Contingent interest
H1215:Life interest or life rent
H1225:Reversionary interest
H1229:Vested interest
H1236:Discretionary trusts
H1241:Charitable trusts
Jointly owned capital
H1244:Real or heritable property
H1251:How to decide ownership of jointly owned capital
H1253:Other ways to become tenants in common or common owners
H1258:Evidence of joint ownership
H1260:Other assets
H1262:Jointly owned capital outside the UK
H1263:Valuation of jointly owned capital
Couples who are separated, divorced or whose civil partnership
H1266:has been dissolved

Mentally sick or disabled persons
H1276:Beneficial interest
H1277:Court of Protection
H1281:The Courts in Scotland
H1282:Power of attorney
H1286:Appointees
H1288:Person not appointed or authorized
H1289:Misuse of capital
Real or heritable property
H1300:Ownership of real or heritable property
H1308:Resulting trust
H1309:Right to buy scheme

When a person is not the beneficial owner of capital
H1330:Bankruptcy
H1333:Court orders
H1339:Liability to repay capital
What is the value of capital
H1601:General
H1602:Capital in the UK
H1603:Costs of sale
H1608:Capital outside of the UK
H1609:Capital not held in sterling
H1610:Current market value
H1612:Current surrender value
H1614:Capital with more than one value
H1615:Encumbrances secured on capital
Jointly owned capital
H1631:The law
H1634:Joint tenant or joint owner
H1636:Tenants in common or common owner
H1637:Capital asset in the UK
H1638:Land or premises
H1644:Bank, post office and building society accounts
H1645:Other assets
Value of a deemed or actual share in a capital asset outside
H1646:the UK
H1649:Business assets
H1650:Value of business assets
H1651:Encumbrances secured on business assets
H1653:Funds held by the Court of Protection
H1656:Individual savings account

Stocks and shares quoted on the London Stock Exchange
H1659:Value of stocks and shares
H1665:Encumbrances secured on stocks and shares
H1667:Government securities

Unit trusts
H1673:Value of unit trusts
H1674:Costs of sales
Value of capital in certain cases
H1675:Bank and building society accounts
H1677:Right to receive income
H1679:Shares in a private company
H1745:How to work out the total amount of capital
H1749:Notional capital
Effect of capital on benefit
H1760:When claimant cannot get benefit
H1761:Assumed yield from capital
H1764:When capital does not affect benefit
Deprivation of capital
H1795:The law
H1797:Who the law applies to
Have people deprived themselves of capital
H1815:Meaning of deprive
H1816:Onus of proof
H1817:Evidence that people no longer have capital
H1818:What the DM decides
H1820:Evidence which may show people had capital
Have people deprived themselves of capital for the purpose
of getting UC or more UC
H1825:Onus of proof
H1826:What the DM decides

Facts which the DM should consider
Were people mentally capable when they deprived themselves
H1830:of capital

Did claimants have a choice when they deprived themselves
H1832:of capital
H1840:Did people know capital affects the amount of UC they can get
H1842:Did people say what they were going to do with their capital
H1844:When did people deprive themselves of capital

What are people going to live on after they have deprived
H1845:themselves of capital

Person treated as sole owner or partner in a company
H1874:The law
H1877:Like a sole owner or partner
What is the amount of notional capital
H1885:How to work out the amount of notional capital
H1886:What the DM decides
Value
H1891:Capital of a company
H1895:Capital spent on a resource which is not worth as much
H1896:Capital which people have deprived themselves of

Diminishing notional capital rule
H1900:The law
H1901:What the DM decides
H1902:The diminishing notional capital rule

How to work out monthly assumed yield............................................ Appendix 1

Chapter H1: Capital

Introduction

H1001 About the guidance

This Chapter gives guidance on capital and its effect on UC.

[H1002-H1014]

H1015 The law

The law says
1. how capital is worked out (1)
2. when people can be treated as having capital they do not have (2)
3. when capital people have can be disregarded (3)
4. when income can be treated as capital (4)
5. when capital can be treated as income (5)
6. single claimants cannot get UC if their capital is above 16,0006
7. joint claimants cannot get UC if their combined capital is above 16,0007
8. when the total of capital is above a certain limit, the claimant is treated as
having income (8).
1 WR Act 12, s 5(1)(a) & (2)(a);UC Regs, reg 45; 2 reg 50; 3 reg 46(1)(b); 4 reg 72(3); 5 reg 46(1)(a);
6 WR Act 12, s 5(1)(a); UC Regs, reg 18(1)(a); 7 WR Act 12, s 5(2)(a); UC Regs, reg 18(1)(b);
8 reg 72(1)

[H1016-H1019]

Is the resource capital

H1020 What is capital H1080 H1215 H1244 H1247 H1300 H1605 H1632 H1643 H1817

Capital is not defined in the regulations but what is meant by capital can be found in
general law. The items listed below cover the kinds of things that would normally be
regarded as a person's capital but is not a definitive list
1. savings from income such as money held in
cash

a bank or building society account

a save as you earn scheme

Post Office account
2. a lump-sum or one-off payment such as

compensation for a personal injury

money which has been borrowed

one made by an employer to a person who is made redundant and the
payment is not earnings

one made by the HO to people on the Refugee Resettlement
Programme

one made to recompense people who have incorrectly had to pay care
charges in the past
3. investments such as
businesses

capital and income bonds

individual savings accounts (ISAs)

national savings certificates

personal pension schemes

premium bonds

stocks and shares

unit trusts
4. real property or in Scotland heritable property, that is land and anything that
has its foundations in the land such as a house and
5. a beneficial interest in the capital of a trust.

H1021

A payment is capital if it is
1. not made or due to be made regularly and
2. made without reference to a period.
The payment is income if this does not apply (1).

1 UC Regs, reg 46(3)

H1022

A person's personal possessions are not to be treated as capital (1).
1 UC Regs, reg 46(2)

H1023 Capital payable by instalments

Where capital is payable by instalments, each payment of an instalment is to be
treated as income if the amount outstanding combined with any other capital the
person has (including the other member of a couple where this applies) exceeds
16,000. Where this does not apply, then the payments of instalments are to be
treated as capital (1).
1 UC Regs, reg 46(4)

[H1024-H1034]

H1035 Rights to capital H1176

People have a right to capital that is due to them now or in the future. That right can
be sold unless there is something that says they cannot sell it.

H1036 H1175 H1289

They also have a right to sue, which means go to Court, if
1. the capital is not paid to them when due and
2. there is no other way they can get the capital.
In England and Wales this is sometimes called "a chose in action". In Scotland the
action is sometimes called "accounting".

H1037

Such rights are capital because they can be sold (1).
1 R(SB) 31/83

Example

On 1.3.10 Sonia agreed to sell her house to her brother Norman for 95,000.
Norman could not afford to pay his sister the full amount so Sonia agreed that he
could pay 40,000 on 1.3.10 and the remaining 55,000 on 1.3.14. On 8.3.14 Sonia
makes a claim for UC. She states she has no capital but that she is owed 55,000
as Norman did not pay her as agreed. The DM decides that Sonia has rights to
capital.
Note: See H1643 for guidance on how to get an expert valuation of rights to capital.

[H1038-H1049]

H1050 When income becomes capital

Income becomes capital if it has not been spent by the end of the assessment
period after the one in which it was received.

Example

Pearl makes a claim for UC on 6 February. She declares savings in a bank account
of 5,973.00. On 24 February, her earnings of 250.00 are paid into that account.
Her assessment period is calculated as 6 Feb to 5 March and the earnings are
taken into account as part of her income for that assessment period. When the next
assessment period begins on 6 March, Pearl still has some of the unspent earnings
so the bank account balance is now 6,105.00. In the assessment period from 6
March to 5 April she will therefore be treated as having an assumed yield from that
capital of 4.35.

[H1051-H1069]

Does the person own the capital
General

H1070 Ownership of capital

Only the capital where people are the beneficial owners is included when working
out what capital they have.

H1071

People are beneficial owners of capital if they have a beneficial interest in it. A
person is the joint beneficial owner of capital if more than one person has a
beneficial interest in the same capital.

H1072

A person whose name the capital is in is called the legal owner. A person is the joint
legal owner of capital if more than one person is the legal owner of the same capital.

H1073

People who are the beneficial owners of capital are usually the legal owners. People
who are the legal and beneficial owners of capital hold that capital for themselves
and can use it as they wish.

H1074

Legal owners who are not the beneficial owners of capital are holding that capital on
trust for the beneficial owners (1). They cannot use the capital for themselves. It
should be used for the beneficial owners.

1 R(SB) 23/85

H1075

Legal owners can hold capital which
1. they and
2. other people who are not the legal owners
are the beneficial owners of. In that case the legal owners are holding the capital on
trust for themselves and the other beneficial owners. The legal owners can use for
themselves only the capital which they are the beneficial owners of. The remaining
capital should be used for the other beneficial owners.

H1076

Only the legal owners of capital can withdraw or sell it.

H1077 Ownership of capital of a child or young person

Capital owned either legally or beneficially by a dependent child or qualifying young
person is not to be included in the capital of the claimant (1). However, the DM may
still need to make enquiries about such capital if it appears to be owned by the
claimant but is actually beneficially owned by a child or young person for whom they
are responsible.

1 WR Act 12, s 5

H1078

Children and young people may not be the legal owners of the capital of which they
are the beneficial owners. This is because businesses, such as banks, will not enter
into a contract with them. If they are the beneficial owners and not the legal owners
their capital will be held on trust by another person.

H1079

Children and young people become the legal owners of their capital when the terms
of the trust say they can have the capital. In England and Wales this may be when
they are 18 years old and in Scotland when they are 16.

H1080

A child or young person cannot be the legal owner of
1. real or heritable property (see H1020 4.) or
2. shares.
Sometimes a mistake is made and a child or young person is shown as the legal
owner.

H1081 How a person gets a beneficial interest in capital

People can get a beneficial interest in capital by
1. saving up their income such as money in a bank account
2. using their money to buy capital such as premium bonds
3. using money which has been lent to them, such as a mortgage, to buy
capital (1)
4. being given capital such as a lump-sum payment of compensation
5. having a beneficial interest in a trust.
1 R(IS) 8/92

[H1082-H1089]

How to work out if a person is the beneficial owner of capital

H1090 The person is the legal owner

If people are the legal owners of capital, assume that they are the beneficial owners unless
1. there is written evidence such as a Deed of Trust which says who has a
beneficial interest in the capital or
2. the legal owners say they have
2.1 no beneficial interest or
2.2 only a share in the beneficial interest.
Note:
It is the responsibility of the legal owners of capital to establish that they are
not the beneficial owners.

H1091 Written evidence

If there is written evidence naming who has a beneficial interest in the capital the
people named in the evidence are the beneficial owners.

H1092 No beneficial interest in the capital or only a share in it

If the legal owners say they have no beneficial interest in the capital or only a share
in it the DM has to decide who has a beneficial interest in the capital in order to
decide who the beneficial owners are.

H1093

To decide who has a beneficial interest the DM needs to know
1. whose capital it is and
2. what the person whose capital it is says it has to be used for.
To decide whose capital it is the DM needs to know whose money was used to get
the capital.

H1094 The legal owners use their money to get capital

Legal owners who use their money to get capital have a beneficial interest in that
capital and are beneficial owners of it.

H1095

A legal owner of a bank account is the
1. sole beneficial owner of the account if only the legal owner's money is paid
into the account and
2. joint beneficial owner if there is more than one legal owner and one or more
of the legal owners pays money into the account.

H1096

If the legal owners
1. use their money to get capital and
2. they say they cannot use the capital because they have set it aside for
another person
the legal owners are the beneficial owners of the capital unless they have actually
created a trust (1).

Example

Hugh has some money in a building society account. The account is in his name so
he is the legal owner of the money. He says that the money in the account, which he
alone deposited, is not his because it is used to pay his grandchild's school fees.
The DM decides that Hugh is the beneficial owner of all the money in the account.
This is because he is the only person who has put money into the account and there
is no evidence of a clear indication that his intention was to create a trust.
1 R(IS) 1/90

H1097 The legal owners do not use their money to get the capital

If the legal owners
1. do not use their own money to get the capital and
2. the person whose money has been used says the money has been
2.1
lent or
2.2 given
to the legal owners
the legal owners are the beneficial owners of the capital.

H1098

A legal owner of a bank account is the beneficial owner of any money in the account
which has been lent or given to the legal owner by another person.

H1099

If the legal owners
1. do not use their own money to get capital and
2. the money which has been used belongs to
2.1
a child or young person or
2.2
some other people and they say
2.2.a
it is their capital and
2.2.b
who the capital is to be used for
the legal owners are not the beneficial owners of the capital because they are
holding it on trust.

Example

Pradeep has a building society account. It is in her name so she is the legal owner
of the money in that account. However, she says that the money in the account
belongs to her sister Leena who is working abroad. On the day the account was
opened 20,000 was put into it. Nothing has been paid into the account except
interest and no money has been taken out. The DM has evidence from Leena that
she gave 20,000 to Pradeep to save for her whilst she was working abroad and
she wants it, and the interest, back when she returns. The DM decides that Pradeep
is not the beneficial owner of the money in the building society account because she
is holding it on trust for Leena.

H1100 More guidance

H1120 - H1339 gives guidance on how to work out the beneficial interest a person
has in capital in certain types of cases.

[H1101-H1119]

Beneficial ownership in particular cases

H1120 About the guidance H1100

This part gives guidance on how to work out if a person is the beneficial owner of
capital in certain types of cases.

H1121

The guidance in this part involves principles of law. The law in England and Wales
can be different from the law in Scotland but the outcome may be the same. If the
outcome is different, the guidance will be distinguished.

[H1122-H1129]

Businesses and limited companies

H1130 Businesses

A person who is the only owner of a business is the beneficial owner of all of the
capital of the business.

H1131

A person who owns a business with others has an equal share of the beneficial
interest in the capital of the business unless the owners agree the shares should not
be equal (1). The agreement between the owners does not have to be in writing. A
person who has a share in the beneficial interest is a joint beneficial owner.
1 Partnership Act 1924, s 24(1)

H1132 Limited companies

A company's capital is owned by the company. Directors of the company are not the
beneficial owners of the capital of the company.

H1133

If a director has lent capital to the company the loan is included in the capital of the
company. The director's rights to the capital that has been lent are included when
working out the director's capital.

H1134

If a director
1. has shares in the company and
2. is the sole or joint beneficial owner of those shares
the shares will be included when working out the director's capital.

H1135 Bank, post office and building society accounts H1260 H1644

A bank, PO or building society account can be more than one asset in certain
circumstances. This applies if evidence clearly shows that there is a separate part of
a jointly owned bank or similar account where a claimant has
1. no beneficial interest or
2. a sole beneficial interest.
If
1. applies, the claimant is only treated as possessing an equal share of the
amount where the beneficial interest is shared.
If
2. applies, the claimant is treated as possessing the whole amount that is solely
owned and an equal share of the amount where the beneficial interest is shared.
If neither
1. or 2. apply the claimant is treated as beneficially owning the whole
account in equal shares with the other joint owners.

Example

On 8 March Andrew makes a claim for UC. He has a joint bank account with his
mother, Hilda, who is in a care home. There is no dispute that Andrew and Hilda are
the joint legal owners of the account in which, on 8 March, there is the sum of
12,400. Andrew provides evidence that he received a legacy of 2,000 which he
paid into the account and that Hilda has made all other deposits. The only
withdrawals have been made to pay Hilda's care home fees. The DM decides that
Andrew has capital of 2,000, the amount of his beneficial interest in the account.

[H1136-H1139]

H1140 Capital held by a solicitor

People are the beneficial owners of capital, such as a payment of damages for
personal injury, if it is held by their solicitor (1) unless
1. in England and Wales the amount to be repaid to the Legal Services
Commission has not been worked out (see H1141 - H1142) or
2. in
Scotland
2.1 the amount to be repaid to the Scotland Legal Aid Board has not been
recovered and
2.2 a discharge has not been granted (see H1143 - H1144).

1 R(SB) 17/87

H1141 H1140 H1142

In England and Wales the Legal Services Commission provides funding to help
people take or defend legal proceedings. A person may have to repay all or some of
their legal costs out of money or property they have gained or kept as a result of the
proceedings. In such cases, the funding provided by the Legal Services
Commission can act as a loan.

H1142 H1140

Where H1141 applies the Legal Services Commission work out a fair and
reasonable amount of the costs to be repaid. Until the Legal Services Commission
do this, money or property gained or kept is held by a person's solicitor. A person is
not the beneficial owner of any such money or property until after the amount to be
repaid to the Legal Services Commission has been worked out.

Example

Alison was awarded the sum of 25,000 as payment of damages following a road
traffic accident. This money is being held by Alison's solicitor. Alison received
funding from the Legal Services Commission. Alison is not the beneficial owner of
the sum she was awarded until the Legal Services Commission work out the
amount to be repaid.

H1143 H1140 H1144

In Scotland the Scottish Legal Aid Board provides funding to help certain people
take or defend legal proceedings. The Board is able to recoup their expenditure out
of any property recovered or preserved for the person granted legal aid. The Board
is also able to recoup their expenditure where there is a settlement to avoid
proceedings or bring them to an end. In such cases, the funding provided by the
Scottish Legal Aid Board can act as a loan.

H1144 H1140

Where H1143 applies the money or property gained or preserved is usually paid to
the Scottish Legal Aid Board. However, the money or property may be held by a
person's solicitor and the amount to be repaid worked out by the Scottish Legal Aid
Board. The person's solicitor cannot dispose of the money or property or use it in
any way until the Board has recovered the amount due and granted the person a
discharge. A person is not the beneficial owner of such money or property until
1. the amount to be repaid to the Scottish Legal Aid Board has been recovered
and
2. a discharge has been granted.

[H1145-H1149]

H1150 Gifts H1254 H1308

A person who is given capital is the beneficial owner of that capital. In England and
Wales it can be assumed a gift has been made if the people involved are related in
certain recognised ways. This is called presumption of advancement.

H1151

It can be assumed a child has been given the beneficial ownership of capital if
1. the parent
of
or
2. a person who has assumed financial responsibility for
the child gives legal ownership of the capital to that child.

H1152

It can be assumed wives have been given the beneficial ownership of capital if the
husband has given legal ownership of the capital to them. This also applies to
women who are given legal ownership of capital by the man they are going to marry.

H1153 H1308

It has been held that the presumption of advancement does not have the force that
it had in the past. Accordingly it is easier for circumstances to show that the transfer
of capital from husband to wife is not a gift (1). The DM should not therefore assume
that beneficial ownership has been given away if there is evidence to show that an
outright gift was not made.
1 R(IS) 2/93

[H1154-H1168]

H1169 Interest in the estate of a person who has died

When people die the capital they have is called the estate.

H1170

People have died
1. testate if they have left a will which says who gets the capital or
2. intestate if they have not left a will.

H1171

An estate is administered or distributed by
1. executors if there is a will or
2. if there is not a will
2.1 in England or Wales administrators
2.2 in Scotland executors dative.
They hold the dead person's estate on trust and may also be beneficiaries of the
estate.

H1172

It may take a long time before the executor, administrator or executor dative can
administer or distribute the estate. The administration or distribution is usually
complete when
1. all the dead person's
1.1 capital is accounted for and
1.2 debts are paid and
2. any dispute is settled.

H1173 H1176

An executor, administrator or executor dative does not have to administer an estate (1) until
1. in England and Wales one year after the date of death or
2. in Scotland six months after the date of death or
3. a longer period if the estate is complex.

1 R(SB) 5/85(T)

H1174

The people named in a will or the relatives of a person who has died intestate have
no interest in specific property in the estate until the executors, administrators or
executors dative
1. are in a position to distribute the estate or
2. would be in a position to complete the administration of the estate if they had
acted properly.
Note:
This does not apply to property specifically bequeathed in a will. Such
property belongs to the person who inherits the property from the date of death of
the person whose estate is being administered and is actual capital. This is subject
only to the right of the executors or executors dative to resort to the asset if the
remainder of the estate is insufficient to meet the outstanding debts of the
deceased (1).

1 R(IS) 1/01

H1175

Pending the completion of the administration, a beneficiary without a specific
bequest (a residuary beneficiary) has valuable rights in the form of a chose in action
(see H1036). This can be valued (H1643) and should be taken into account as
actual capital. If the residuary beneficiary gives away his interest by a deed of
variation before administration is complete then this may amount to deprivation and
the DM should consider H1815 et seq.

H1176

At the end of the period in H1173 the people named in a will or the relatives of a
person who has died have a right to the capital that is due to them from the estate
(see H1035). A person's rights to capital are included when working out that
person's capital.

H1177

Separate guidance sets out cases where DMs may require expert valuation of rights
to capital (see H1637 et seq).

H1178

People only have a beneficial interest in the capital assets of the estate when
ownership of those assets has been transferred to them.

H1179

Interest in a trust

H1180 When there is a trust

There is a trust when a person
1. gives capital to another person to hold and
2. says for whom that capital has to be used.

H1181

The person
1. giving the capital in England and Wales is the donor or in Scotland the truster
2. holding the capital is the trustee and is the legal owner of the capital
3. who the capital has to be used for is the donee and is the beneficial owner.

H1182

People for whom the capital has to be used can include the trustee.

[H1183-H1184]

H1185 Trustees

A trustee can be any person or body such as
1. a relative
2. solicitor
3. bank
4. in England and Wales the
4.1 donor
4.2
Court of Protection
4.3
Public Trustees
5. in Scotland the truster.

H1186

A trustee has to do what the terms of the trust and the law says (1).
1 Trustee Act 1925 as amended byTrustees Act 2000; Trusts (Scotland) Act 1921 as amended by Trusts
(Scotland) Act 1961

[H1187-H1189]

H1190 Terms of a trust

The terms of a trust say
1. what is being held on trust and
2. who the donees are.

H1191

The terms do not have to be written down provided the trust property is not land, but
if they are they may be in a
1. will or
2. deed of trust or
3. deed of settlement.
Note:
In Scotland the DM must check that the creation of the trust satisfies Scottish
law (1) to prove the existence of a trust.
1 Requirements of Writing (Scotland) Act 1995, s 1(2), (3) and (4); R(IS) 10/99

[H1192-H1194]

H1195 Interest in a trust

H1205 - H1243 gives guidance on
1. some interests people can have in a trust and
2. when they get their interest.

H1196

A person's rights to capital under a trust are included when working out what capital
a person has.

H1197

More than one person can have an interest in a trust. If more than one person has
an interest in a trust the person is not a joint beneficial owner. Each person's
interest belongs to that person. It is not shared with the other people having an
interest in the trust.

H1198

The expenses of the trustees will be deducted before any payments are made out of
the trust.

[H1199-H1204]

H1205 Contingent interest H1195

Persons have a contingent interest in a trust if they have to do something or
something has to happen before they can get the interest.

H1206

For example, if the terms of the trust say a person can have 10,000 if the person
lives to the age of 21 the interest is a contingent interest. If the person lives to the
age of 21 the person gets 10,000. If the person does not live to the age of 21 the
person gets nothing.

H1207

Trustees pay the income earned on a contingent interest to the people who have the
interest if the
1. terms of the trust do not say who gets the income and
2. people with the interest have
2.1 reached the age of maturity, which in England and Wales is 18 years
old and in Scotland 16 and
2.2 not yet been required to meet the contingency (1).
Any income which is paid is taken into account as income. The DM should decide if
people have notional income if they are due income from a trust and it is not paid.

1 Trustee Act 1925, s 31(1)(ii); Trusts (Scotland) Act 1961, s 5

H1208

For example, in England and Wales if the terms of the trust say a person can have
10,000 if that person lives to the age of 21 the trustees can pay the person the
income earned on the 10,000 from the age of 18 because the person
1. has reached the age of majority and
2. has not yet been required to meet the contingency as the person has not lived
to the age of 21.

[H1209-H1214]

H1215 Life interest or life rent

In England and Wales people have a life interest or in Scotland a life rent in a trust if
they have an interest for the duration of their life. A person may have a life interest
or a life rent in the
1. capital
or
2. real or heritable property (see H1020 4.), such as a house
of a trust. People will receive the income from capital if they have a life interest or
life rent in it.

H1216

For example, a person has a life interest or a life rent in the
1. income if the terms of a trust say a person can have the interest paid on the
funds of the trust for life or
2. property if the terms say a person has the right to live in it for life.

H1217

People keep the right to live in the property even if they do not live in it. But the
trustees may decide to sell the property if the person no longer needs it to live in for
example when a person goes permanently into residential care.

H1218

If the property is sold the person will have a right to
1. the income from the money the trustees get from selling the property or
2. be paid a lump sum from the money equal to the value of the person's
remaining life interest or life rent.

H1219

Rights under a life interest or life rent end with the death of the person who has the
life interest. The assets of the trust fund do not form part of their estate.

[H1220-H1224]

H1225 Reversionary interest

In England and Wales an interest in a trust is reversionary if the possession or
enjoyment of it is postponed to the prior interest of another person in the same
capital.

Example

George has a reversionary interest in a house if the terms of the trust say
1. Edith has a life interest in that house and
2. George gets the house on the death of Edith.
George's interest in the house is reversionary until he takes possession of the
house. George takes possession of the house when Edith dies.

H1226

H1227

A reversionary interest is not the same as a contingent interest because people with
a reversionary interest already have an interest in a trust. They do not have to do
something or wait for something to happen before they get an interest in a trust but
a person with a contingent interest does.

H1228

If people with a reversionary interest die before they take possession of their interest
the reversionary interest is included in their estate.

H1229 Vested interest

Children or young people have a vested interest in capital which
1. they are the beneficial owners of and
2. is being held for them until they reach the age of majority, which in England
and Wales is 18 years old and in Scotland 16.

H1230

A vested interest is not the same as a contingent or reversionary interest because
the capital already belongs to the child or young person. A child or young person
may have a contingent or reversionary interest in a trust which has been set up with
another person's capital.

H1231

If children and young people with a vested interest die before they get their interest
the interest is included in their estate.

H1232

In England and Wales trustees may decide to pay the income earned on a vested
interest to the parent or guardian of the child or young person who has the interest (1).
If the trustees make a payment of income it is income which is treated as capital.
The trustees cannot be made to pay over the income.
1 Trustee Act 1925, s 31(1)(i)

[H1233-H1235]

H1236 Discretionary trusts

A discretionary trust is one where the trustees have the discretion to make
payments to certain people. Such people have an interest and in England and
Wales are called discretionary objects.

H1237

Many trusts let the trustees invest the capital of a trust at their absolute discretion.
This means the trustees have a choice in how the capital is invested. This does not
mean the trust is a discretionary trust. There has to be something else in the terms
of the trust to show it is a discretionary trust.

H1238

The trustees of a discretionary trust may or may not make payments to the people
with an interest. The trustees cannot be made to make payments to those people.

[H1239-H1240]

H1241 Charitable trusts

A charitable trust is a trust which is set up for
1. the relief of poverty or
2. the advancement of education or religion or
3. any other purpose which benefits the community.

H1242

Trustees of a charitable trust have discretion to make payments to people who
satisfy the terms of the trust. They may or may not make payments. They cannot be
made to make payments.

H1243 H1195

Jointly-owned capital

H1244 Real or heritable property H1262 H1633

In England and Wales, when two or more people jointly own real property (see H1020 4.) they do so as
1. joint-tenants
or
2. tenants in common.

H1245

When people jointly own real property as joint-tenants each person owns the whole
asset jointly and they have no separate and distinct shares. If a joint-tenant dies the
asset passes to the surviving joint-tenant or joint-tenants. However when people
jointly own real property as tenants in common each person's interest in the asset is
their own share. The shares of tenants in common may be equal or unequal. If a
tenant in common dies their share of the asset does not pass automatically to the
surviving tenant or tenants in common.

H1246

The terms joint-tenants and tenants in common are legal terms appropriate to joint
ownership of real property in England and Wales. DMs should not confuse them
with tenancies that arise when people rent land or premises.

H1247

In Scotland, when two or more people own heritable property (see H1020 4.) they
do so as
1. joint owners
or
2. common
owners.

H1248

When two or more people own heritable property as joint owners they do not have
individual rights in the property which would allow them to deal with the property as
individuals. Joint owners cannot dispose of their share of the property. If a person
stops being a joint owner their share of the property goes to the other joint owners.

H1249

Where two or more people own property as common owners, each has a separate
share in the property which they can dispose of independently of the other common
owners.

H1250

If a claimant beneficially owns a capital asset with one or more persons the DM will
have to decide whether those people own the asset as
1. joint-tenants or, in Scotland, joint owners or
2. tenants in common or, in Scotland, common owners.

H1251 How to decide ownership of jointly-owned capital

In England and Wales, when two or more people buy real property they should be asked
1. whether they wish to be
1.1 joint-tenants
or
1.2
tenants in common and
2. if
1.2 applies the share of the property each person wishes to own.

Example

Mick and his civil partner George decide to buy a house in Bedford. When asked,
George wants to leave his share of the property to his children Neil and Sophie.
Mick and George therefore agree to be tenants in common. Mick provided 75% of
the purchase price and George the other 25%. They therefore agree that Mick
should own 75% of the property and George should own 25%.

H1252

In Scotland, when two or more people buy heritable property they will decide
whether to be joint owners or common owners. The common owners should decide
the share of the property each person wishes to own.

Example

Frazer and his wife Morag decide to buy a house in Dundee. They decide to be
common owners. Frazer and Morag both wish to have an equal share of the
property. Therefore they decide that they should both own 50% of the property.

H1253 Other ways to become tenants in common or common owners

As well as making a decision when real or heritable property is bought, there are
other ways in which people can become tenants in common or common owners.
These include

being left real or heritable property under the terms of a will

contributing to the purchase price of real or heritable property, for example
under the right to buy scheme (see H1309 et seq)

changing from joint-tenants or joint owners to tenants in common or common
owners.

Example 1

Sue and Melinda are sisters who inherited their mother's house. The terms of their
mother's will specified that Sue should own 60% of the house and Melinda 40% of
the house as tenants in common.

Example 2

Cecilia bought her council house under the right to buy scheme. She obtained a
statutory discount of 8,000. Her son Ross provided the other 32,000 necessary
for her to buy the house. The statutory discount obtained by Cecilia is her
contribution to the purchase price of the property. There is no evidence that Cecilia
and Ross wanted to own different shares in the house. Therefore Cecilia owns 20%
of the property and Ross 80%.

Example 3

When Alan and Lynnette were married they bought a house as joint-tenants.
However, when they divorced Alan gave notice to Lynnette that he wished to put an
end to his 50% interest in the property. Alan did this so that in the event of his death
the house would not automatically pass under the rules of survivorship to Lynnette.
The effect of this notice is that the joint-tenancy is changed into a tenancy in
common which gives both Alan and Lynnette separate and distinct shares in the
property.

H1254

When one person uses their money to buy real or heritable property in the name of
another person there is a presumption of a resulting trust (see H1308). If that other
person also contributes to the purchase of the property the two people will be
tenants in common unless there is evidence of a contrary intention. However, DMs
should note H1308 1. and the rule of presumption of advancement (see H1150 et
seq).

H1255

A person who is a tenant in common or common owner does not necessarily own
an exact percentage of a property. For example, one person could own 36.71% of a
house and another person the other 63.29%.

H1256

After it has been agreed between tenants in common or common owners what
share each person owns it is possible for the agreed shares to be varied. This may
happen where a tenant in common or common owner
1. pays
1.1 the mortgage
or
1.2 a greater share of the mortgage
on a property or
2. spends money on improvements to a property.

Example

Shahid and his brother Saleem bought a house together as tenants in common.
They agreed that each of them should own 50% of the property and pay half the
mortgage. Shahid takes unpaid leave from his job to travel abroad so he is not able
to make repayments on his share of the mortgage. Saleem therefore agrees to pay
all of the mortgage on the property. Saleem's share of the property increases in
proportion to the extra payments he makes. Shahid's share of the property
decreases by the same amount.

H1257

If a claimant reduces his share of a jointly-owned property the DM should consider
the rules on deprivation of capital see H1795 et seq.

H1258 Evidence of joint-ownership

Evidence of the type of joint-ownership of real or heritable property and if
appropriate the share each person owns can be obtained from
1. the deeds to the property or
2. information on the file of the solicitor acting for the people buying the property
or
3. a definitive agreement between the people buying the property.

H1259

When a claimant states that he owns a share of real or heritable property as a
tenant in common or common owner the DM should obtain evidence of this. The DM
should also obtain evidence of the claimant's share of the property. If the claimant is
unable to provide evidence of unequal shares in the property, the DM should decide
on the balance of probability (see ADM Chapter A1: Principles of decision making
and evidence) that the shares are equal.

H1260 Other assets

Two or more people may jointly own other assets such as bank accounts (see H1135) and shares. When a claimant states that he has a separate right of
ownership of an asset the DM should obtain evidence of this. The DM should also
obtain evidence of the claimant's share of the asset.

Example

Kathy and her father have a joint building society account. The account is in both
their names so they are joint legal owners of the account. There is 15,000 in the
account on the date of Kathy's claim for UC. Kathy provides evidence that both she
and her father paid money into the account but no evidence of the amount paid by
each of them. The DM decides that Kathy is treated as having a half share in the
account (7,500).

H1261

A person does not have a joint beneficial interest in a trust if more than one person
has an interest in that trust. Each person's interest belongs to that person. It is not
shared with other people having an interest in the trust.

H1262 Jointly-owned capital outside the United Kingdom

To decide the type of joint ownership of a capital asset outside the UK the DM
should consider
1. the law of the country where the asset is held and
2. the basis on which the asset is held.
The DM should obtain evidence of joint ownership. If the DM is satisfied that the law
of the country where the asset is held is not different, the guidance at H1244 et seq
should be followed. DMs should send cases of doubt to DMA Leeds for advice.

H1263 Valuation of jointly-owned capital

See H1631 - H1648 for guidance on how to value a claimant's share of jointly-
owned capital.

[H1264-H1265]

H1266 Couples who are separated, divorced or whose civil partnership has been dissolved

People who are married or civil partners and have separated are the beneficial
owners of capital if they were the owners before the breakdown of the marriage or
civil partnership. That capital is included when working out what capital a person
has.

H1267

After they have separated, divorced or dissolved their civil partnership a couple may
1. ask a Court to or
2. on the advice of their solicitors or
3. themselves
decide which one of them gets the capital. The proceedings in Court are called
ancillary proceedings.

H1268

A Court will take into account
1. the ages of the couple
2. their state of health
3. whether they are able to work and if so what earnings they can get
4. how long they have been married or in a civil partnership or, in Scotland, how
long each party has been economically dependent on the other
5. each person's needs
6. what one of them is able to give to the other
before issuing an order which will say what capital each of them gets.

H1269

A Court may decide that the house in which they used to live
1. cannot be sold until a future date if children of the marriage or civil partnership
are still living in it or
2. can be given to the one who the children are living with and the other one gets
2.1 money immediately or in the future or
2.2 no money.

H1270

People will be the beneficial owners of any capital the Court awards them outright (1).

1 R(IS) 4/96

H1271

If the couple do not go to Court and share up the capital
1. in the way their solicitors say or
2. between themselves
a person will be the beneficial owner of the capital the person is left with. If 2.
applies and there is clear evidence that capital has been given away so the person
can get benefit or more benefit the DM should decide whether the person has
notional capital.

H1272

A person may seek an order for financial provision and property adjustment which
1 occurs
1. on the granting of a decree of
1.1
a divorce or dissolution of civil partnership or
1.2
nullity of marriage or civil partnership or
1.3 separation
or
2. at any time after any of the events in 1..

1 Matrimonial Causes Act 1973

H1273

A person does not have a beneficial interest in any capital they are seeking unless
and until, a property adjustment order is made (1).
1 R(IS) 1/03

[H1274-H1275]

Mentally sick or disabled persons

H1276 Beneficial interest

People who are
1. mentally sick or disabled and
2. unable to deal with their capital
do not lose their beneficial interest in capital (1). Another person may be appointed to
deal with it.
1 R(IS) 9/04

H1277 Court of Protection H1653

In England and Wales the Court of Protection
1. protects and
2. deals with
the capital of a mentally sick or disabled person (1).

1 Mental Health Act 1983

H1278

The Court may appoint another person to deal with the capital. A person appointed
by the Court is called a Deputy. The Court will issue an order which says what
1. money the Deputy can deal with and
2. the Deputy has to do with the money.
The Deputies have to go back to Court if they want more money or to do something
else with the money.

H1279

The Court may take some time to reach a decision. The Court can issue interim
certificates if mentally sick or disabled people need money immediately to pay for
their day to day needs such as nursing home fees. The certificate will say what and
how much money can be used by a person to pay for those needs.

H1280

Capital held by the Court or Deputies is held on trust.

H1281 The Courts in Scotland

In Scotland the Sheriff Court has powers similar to the Court of Protection in
England and Wales. A person appointed (1) by the Sheriff Court to deal with the
capital of a mentally sick or disabled person is called a guardian.
1 Adults with Incapacity (Scotland) Act 2000

H1282 Power of Attorney

People who give another person power of attorney authorize that person to deal with
1. all of their money if they give the person unlimited power or
2. some of their money if they give them restricted power.

H1283

People who give another person power of attorney remain the beneficial owners of
their capital.

H1284

In England and Wales people with power of attorney are not authorized if the person
who gave them power
1. becomes mentally sick or disabled and
2. the power has not been registered with the Court of Protection.

H1285

In Scotland, a power of attorney granted on or after 2 April 2001 lapses when a
person becomes incapable of managing their own affairs unless it is a continuing
power. If it is a continuing power of attorney, certain conditions need to be met,
including registration with The Office of the Public Guardian, prior to any use of the
power of attorney. (See the Agents, Appointees, Attorneys and Deputies Guide for
more detail.)

H1286 Appointees

A person appointed by the Secretary of State to act, for SS purposes only, on behalf
of another person is called an appointee.

H1287

These appointees cannot deal with the capital of a mentally sick or disabled person
unless they have been appointed
1. in England and Wales the Deputy by the Court of Protection or
2. in Scotland the guardians by the Sheriff Court.
Note: See the Agents, Appointees, Attorneys and Deputies Guide for more detail.

H1288 Person not appointed or authorized

A person who has not been
1. appointed or
2. authorized
who is holding capital of a mentally sick or disabled person is holding it on trust.

H1289 Misuse of capital H1290 H1798

In England and Wales mentally sick or disabled people have rights to capital if the
person who is
1. appointed or authorized to deal with their capital or
2. not appointed or authorized
misuses the capital. For example, if they use the capital for themselves or give it
away. In such circumstances the beneficial owner has a chose in action to recover
the capital that has been misused (see H1036). The value of the chose in action is
actual, not notional capital (1).

1 R(IS) 17/98

H1290 H1798

However, a person who has power of attorney for another person can make gifts
that are not unreasonable (1). Examples of gifts that are not unreasonable to make are
normal birthday, wedding or seasonal (for example Christmas) gifts. Where gifts that
have been made by a person with power of attorney are unreasonable H1289
applies but where they are not unreasonable H1815 et seq should be considered (2).

Example

Helen has power of attorney for her mother, Barbara, who is in receipt of UC.
Helen's daughter, Kaitlan, celebrates her eighteenth birthday. Barbara had told
Helen that she would buy Kaitlan a car for her eighteenth birthday. Helen therefore
gives Kaitlan 2,000 of Barbara's money so she can buy a car. The DM decides that
the gift is not unreasonable. The DM also considers whether the rules on notional
capital apply.
1 Enduring Powers of Attorney Act 1985, s 3; 2 R(IS) 17/98

[H1291-H1299]

Real or heritable property

H1300 Ownership of real or heritable property

The legal owner of real or heritable property (see H1020 4.) is also the beneficial
owner unless there is
1. something in writing such as a conveyance that
1.1
dates from the time the person gets the property and
1.2
says who has a beneficial interest in the property or
2. a mistake is made and
2.1
nothing is put in writing or
2.2
what is put in writing is wrong or
3. a fraud which shows the person got the property dishonestly or
4. a resulting trust (see H1308).

H1301

An attendance note or other information in the file of the solicitor acting for the legal
owner when the property is bought may show a mistake has been made. For
example, there is
1. an attendance note which says the legal owners told the solicitor who they
wanted the beneficial owners to be or
2. evidence which says another person put up all or some of the money to buy
the property and had not made a gift of it to the legal owners.

H1302

Accept what the legal owners say if
1. they say they have no beneficial interest in the property or only a share in it
and
2. there is evidence from the solicitor which agrees with what the legal owners
say.

H1303

Accept people named as the actual owners are the legal and beneficial owners of
the property if there is evidence which says
1. those claiming to own the property got it dishonestly and
2. who the actual owners of the property are.

H1304

If there is no evidence of a mistake or a fraud the DM has to decide who has a
beneficial interest in the property.

H1305

It is very difficult to get a beneficial interest in real property after it has been bought.
However people can be given a beneficial interest, for example by a deed gift.

H1306

People do not necessarily get a beneficial interest in property just because they
1. pay the legal owner's mortgage on the property or
2. spend money on the property, for example paying for central heating to be
installed.
Such people may have a charge on the property. The amount of the charge is equal
to the amount of money they have spent. Such a charge is sometimes called a lien.

H1307

The partner of the legal owner of a property can get a beneficial interest in that
property if they pay the mortgage because the legal owner can no longer afford to do
so.

H1308 Resulting trust H1254 H1254 H1300

Legal owners are holding property on a resulting trust if another person puts up the
money to buy the property and
1. there is no evidence to say the other person has given the money or the
property to the legal owners and
2. the rule of presumption of advancement (see H1150 - H1153) does not
apply (1).
1 R(SB) 49/83; R(SB) 1/85

H1309 Right to buy scheme H1253

The right to buy scheme lets some LA tenants buy the property they are tenants of
at a discounted price. The amount of the discount is based on the number of years
the person has been a tenant.

H1310

People who buy property under the right to buy scheme have a beneficial interest in
the property because of the discount they get. They are
1. the legal and beneficial owners of the property if they use their money or raise
money to pay all of the balance of the purchase price or
2. the joint legal and joint beneficial owners if
2.1 another person uses their money or raises money to pay all of the
balance and
2.2 the person at 2.1 is one of the legal owners or
3. holding the property on trust for themselves and another person if that other person
3.1 uses their money or raises money to pay all of the balance and
3.2 is not a legal owner.

H1311

Under the scheme the people buying the property have to pay back some of the
discount if the property is sold within three years of it being bought.

[H1312-H1329]

When a person is not the beneficial owner of capital

H1330 Bankruptcy

When a person is made bankrupt
1. in England and Wales a Receiver in Bankruptcy or
2. in Scotland an interim trustee
is appointed. Then a Trustee in Bankruptcy is appointed. The Receiver in
Bankruptcy or the interim trustee may be the same person as the Trustee in
Bankruptcy.

H1331

People who have been made bankrupt have no power to deal with their property
except with the approval of the court once the bankruptcy order is made. This being
so, they should normally be treated as having no beneficial interest in their capital
from the date of the order. It may be some time after this that a trustee in bankruptcy
is appointed (1).

1 KS v SSWP (JSA) [2009] UKUT 122 (AAC); [2010] AACR 3

H1332

If the bankrupt person is the joint beneficial owner of capital the other beneficial
owners still have a beneficial interest in the capital unless they are also bankrupt.

H1333 Court orders

A Court can make an order such as a restraint order which stops people
withdrawing or selling their capital.

H1334

The order will list the capital involved.

H1335

During the period of the order the people named in the order remain the beneficial
owners of the capital. The restraint order restricts a person from dealing with the
property listed in the order so that they are unable to do anything with it that is not
permitted under the order. The practical effect of this is that while a person will be
the beneficial owner of the property, the value of such property is shown as nil for
benefit purposes.

H1336

The period starts with the date of the order and ends on the date
1. given in the order or
2. the Court withdraws the order.

H1337

The order may let people withdraw a fixed sum of money each week from their
capital to pay for living expenses. If money is withdrawn it should be treated as the
person's capital. If the claimant spends the amount he is allowed to withdraw then
this will have no effect on his benefit.

H1338

In Scotland an arrestment has a similar effect.

H1339 Liability to repay capital H1100 H1834

People have a beneficial interest in capital that has been given to them even if it has
to be repaid. However, people no longer have a beneficial interest in capital they
have been given if they are under a certain and immediate liability to repay it (1).
People are no longer the beneficial owners of the capital from the date the certain
and immediate liability arises.
1 R(IS) 5/99

[H1340-H1600]

What is the value of capital

H1601 General

All of the capital a single claimant, or for joint claimants their combined capital, is
included when working out the amount of capital but not capital which is
disregarded (1).
1 WR Act 12, s 5; UC Regs, reg 46

H1602 Capital in the UK H1653 H1664

The value of capital which a person has in the UK, is its current market or surrender
value less
1. 10% of the value if there are costs of sale and
2. the amount of any encumbrances secured on the capital (1).
1 UC Regs, reg 49(1)

Example

Louise owns a holiday home in Cornwall valued at 125,000. She has a mortgage
on the property of 100500. The costs of sale (10% of the value) would be 12,500.
This leaves the amount of capital to be taken into account as 12,000.

H1603 Costs of sale

10% of the current market or surrender value or price is only deducted if there are
costs when a person sells capital. 10% of the value or price is deducted even if the
actual costs are more or less than that amount.

H1604

There are normally costs of sale if a person
1. uses another person to sell the capital, such as
1.1 an estate agent
1.2 a broker
1.3 an auctioneer or
2. needs the services of another person before the capital can be sold , such as
2.1 a solicitor or
2.2 an accountant.

H1605

There are always costs of sale if the capital is real or heritable property (see H1020
4.)1.

1 R(IS) 21/93

H1606

Costs of sale do not include the cost of
1. postage, such as when a person applies in writing to withdraw premium
bonds or
2. travelling expenses such as bus fares when a person visits a building society
to withdraw money.

H1607

DMs work out 10% of the current market or surrender value or price if there are
costs of sale. Costs of sale are worked out before a deduction is made for any
encumbrances secured on the capital.

H1608 Capital outside of the UK H1653

The value of capital which a person has outside of the UK is
1. its current market or surrender value in the country outside of the UK if people
can transfer the money they get for the capital to the UK or
2. the price people get for it if sold to a willing buyer in the UK if the country will
not let them transfer money to the UK.
1 UC Regs, reg 49(2)

Example

Filipe owns a house in Portugal which has been valued at the equivalent of 62,000.
He has a mortgage of 50,000 on the house. He would be able to transfer proceeds
of the sale of the house to the UK. The full value of the property is taken into
account as his capital and so as his capital exceeds 16,000, he is not entitled to
UC.

H1609 Capital not held in sterling

If the capital held by a person is in a currency other than sterling, the value should
be calculated after deducting any banking charges or commission that is payable for
the purpose of converting that capital into sterling (1).
1 UC Regs, reg 49(3)

H1610 Current market value

Current market value means the price a willing buyer will pay a willing seller in that
market on the relevant date (1). The market is the market for what is for sale. So if a
house is for sale it is the property market. The relevant date is the date of claim or
date of revision/supersession.

1 R(SB) 6/84

H1611

DMs work out the current market value
1. themselves or
2. from evidence given by the claimant or person whose capital it is or
3. from evidence from an expert valuer.

H1612 Current surrender value

Current surrender value means the money people would get if
1. they withdraw their capital on the date of claim, revision or supersession and
2. that date is before the date a person gets the capital under the terms of the
agreement and
3. the terms of the agreement lets a person withdraw the capital before the
agreed date.

H1613

The DM accepts the money people would get on the date of claim, revision or
supersession as the value. If the agreement does not let a person withdraw capital
before the agreed date the value of the capital is its current market value.

H1614 Capital with more than one value

DMs have to decide which value to accept if capital has more than one value, such
as when capital has a current market and surrender value (1).
1 R(SB) 6/84

H1615 Encumbrances secured on capital

An encumbrance is secured on capital when a person is owed money and has a right
1. to the capital or
2. to stop it being sold
until the money owed is paid back. Such a debt is a legal charge or mortgage and is
deducted from the value of capital. A debt which is not secured is not deducted (1).

1 R(IS) 21/93

H1616

The amount of the encumbrances which are deducted is the amount of money owed
on the date of claim, revision or supersession. The amount is deducted from the
capital which the debt is secured on. If the debt is secured on more than one item of
capital it is deducted from
1. the total of the values of the capital on which it is secured and
2. the total of the values of the capital which
2.1
is not disregarded and
2.2
on which it is secured
if any of the capital on which it is secured is disregarded when working out what
capital a person has (1).

Example

On 29 January Anwar makes a claim for UC. His capital consists of 20,000 shares
and two houses. He lives in one of the houses, the other is unoccupied. Anwar has
a mortgage which he used to buy the house he lives in. However, the mortgage is
secured on his other house. He is in debt to his bank. The bank is holding the share
certificates and has a charge on the two houses as security for the debt. On 29
January the current market value of the shares is 50,000 and that of the
unoccupied house is 72,000. The amount outstanding on the mortgage is 45,000
and the debt to the bank is 62,000.
The DM decides that the value of the unoccupied house, less 10% for costs of sale
and the mortgage which is secured on it, is 19,800. The DM also decides that the
value of the shares, less 10% for costs of sale, is 45,000. Finally, the DM decides
that the value of the unoccupied house and shares, less the debt to the bank which
is secured on them, is 2,800 (19,800 + 45,000 - 62,000 = 2,800).

1 R(IS) 21/93

H1617

The DM needs to know the amount of money owed on encumbrances secured on
capital at the date of claim or revision. The person whose capital it is has to
1. provide evidence of the amount owed or
2. give permission for someone else to get the information.
The amount owed is deducted from the current market or surrender value or price.

H1618

The DM should not make a deduction if there is no evidence of the amount owed or
permission is not given to get the information and the DM cannot work out the
amount owed from the available evidence.

[H1619-H1630]

Jointly-owned capital

H1631 The law H1263

Where more than one person has a beneficial interest in a capital asset, those
persons are to be treated as having an equal share in the whole of that beneficial
interest, unless there is evidence to show that the shares are divided in a different
1
way .

1 UC Regs, reg 47

H1632

It was assumed that the jointly-owned capital rule applied to all types of joint
ownership. However a Commissioner decided that the jointly-owned capital rule did
not apply to real property (see H1020 4.) which two or more people beneficially own
as tenants in common (1). The Commissioner's decision was upheld by the Court of
Appeal.

1 R(IS) 4/03

H1633

See H1244 et seq for guidance on how to decide whether a claimant owns a capital
asset with one or more persons as a
1. joint-tenant or, in Scotland, joint owner or
2. tenant in common or, in Scotland, common owner.

H1634 Joint-tenant or joint owner

Where the claimant's interest in jointly-owned capital is as a joint-tenant or a joint
owner the DM should
1. treat the claimant and the other beneficial owners as having equal shares in
the asset (1) and
2. value the claimant's deemed share itself, under the normal rules.

1 UC Regs, reg 47

H1635

The DM should not assume that
1. the market value in all cases is the market value of the whole asset divided by
the number of beneficial owners or
2. in the case of a dwelling, any joint-owners who live in the property do not live
there.

H1636 Tenant in common or common owner H1637

Where the claimant has an interest in an asset as a tenant in common or a common
owner the DM should value the claimant's actual share (1).
1 R(IS) 4/03

Example 1

Cecilia and her son Ross own a house as tenants in common. Cecilia owns 20% of
the property and Ross owns 80% but he does not live in it. Cecilia goes into a care
home and makes a claim for UC. The DM decides that the value of Cecilia's share
of the house cannot be disregarded. The DM also decides to take the value of
Cecilia's 20% share of the house into account.

Example 2

Sue and Melinda own a house as tenants in common. Sue owns 60% of the
property and Melinda 40%. Sue and Melinda both go into a care home and claim
UC. The DM decides that their share of the value of the house cannot be
disregarded. When deciding Sue's claim for UC, the DM takes the value of her 60%
share of the property into account. When deciding Melinda's claim for UC, the DM
takes the value of her 40% share of the property into account.

H1637 Capital asset in the UK H1177 H1640 H1640

Where a claimant is a joint-tenant or joint owner, the DM should establish the
market value of the deemed share. Where a claimant is a tenant in common or a
common owner, the DM should establish the market value of the actual share (see
Examples at H1636). The market value is the price that a willing buyer would pay a
willing seller (1) for the share the claimant is deemed to possess or actually
possesses.
1 R(SB) 6/84

H1638 Land or premises H1640 H1640

In the case of land or premises the DM should obtain an expert opinion of the
market value of the deemed or actual share. In either case the DM should ensure
that the expert has taken into account
1. that the claimant is assumed to be a willing seller and
2. whether the other owners would be willing and able to buy the share and
3. whether the other owners would agree to the sale of the asset as a whole and
4. in a case where the other owners would not buy the share or agree to a sale
of the asset as a whole
4.1 whether on the facts of the claimant's particular case the courts would order
4.1.a
the sale of the property as a whole or
4.1.b
the partition of the property and
4.2 the length of time a purchaser may have to wait before obtaining
possession and
4.3 the legal costs a buyer may have to pay if an application to the courts
for an order for sale and/or partition was pursued (this includes both the
buyer and the other parties costs) and
5. the rights of occupation of the other owners and
6. whether any of the other owners are occupying the property and whether they
would be willing to vacate the property and
7. any rights of occupation possessed by any occupants who are not owners
(e.g. tenants) and
8. any encumbrances secured on the asset being valued and
9. any legal protection available to a potential purchaser and
10. any risk that the legal owners may
10.1 sell the property and keep the proceeds for themselves or
10.2 encumber the property with secured debts or
10.3 lease the property and
11. whether there are planning or other restrictions on the property and
12. whether there is a current market for the claimant's share of the property or
whether one might develop in the future.
Note
1: The valuer should consider whether and to what extent each of the above
factors would encourage or discourage a potential purchaser.
Note
2: For the purposes of H1638 4.1 the valuer should not simply assume that
an order will be granted. The specific facts of the case and the relevant law should
be considered. This is because the purpose for which joint-ownership was
established will need to be scrutinized in order to assess whether a court would
order a sale (1).
Note 3: For the purposes of H1638 5. a person can fall within the term "excluded
occupier" if they share the living space of the property with the claimant. However,
this does not give the person any rights against eviction. For a person to
acquire rights against eviction the nature of any licence to remain should be such
that it can be determined by giving reasonable notice.
Note:
4: This is not an exhaustive list of the factors relevant to the value of a
deemed or actual share. In order to reach an opinion on the value of a particular
share, a valuer may have to take additional factors into account (1).
1 R(IS) 1/01
Note
5: Scottish valuations are made on a different basis from those undertaken in
the rest of Britain. In particular they do not involve a discount for factors such as
delayed right to possession.

H1639

The DM should also ensure that the expert has explained
1. whether on the facts of the case there is any market for the deemed or actual
share and where that market lies and
2. how the market value has been calculated including factors relevant to that
calculation and how they affect it and
3. either
3.1 what comparables have been relied on or
3.2 how the valuation has been arrived at without using comparables and
4. whether the valuer has any experience or knowledge of the sale of an
undivided share in the circumstances of the claimant's case and
5. how location, size and condition of a property affect its value and
6. if the property is leasehold, details of the length of the lease and any special
terms in it.
Note
1: A valuation arrived at simply by dividing the value of the property as a whole
by the number of owners and then giving a single discount to reflect the restricted
demand for a deemed or actual share does not meet the requirements of the
regulations.
Note 2: The expert may have to make assumptions because the information is not
available. If this is the case, the DM should ensure that the expert has stated what
information is missing and the assumptions that have been made (1).

1 R(JSA) 1/02

H1640

The DM should accept a valuation that satisfies H1637 and H1638 and not accept
one that does not. If provided with more than one valuation that satisfies H1637 and H1638the DM should decide between them according to which presents the
stronger evidence and arguments.

H1641

The value of a deemed or actual share in a capital asset is
1. the market value of the deemed or actual share less
2. 10% if there would be any expenses of sale (1).
Note:
The amount of any encumbrances secured on the asset should not be
deducted from the market value of the deemed or actual share in these cases. The
encumbrances should be taken into account by the valuer when establishing the
market value.

1 UC Regs, reg 49(1)

H1642

Administrative procedures for obtaining expert opinions on the value of deemed or
actual shares in capital assets have been set up (H1643). If an opinion under these
procedures is challenged on appeal
1. the instructions and evidence given to the valuer should be included in the
evidence put to the tribunal and
2. obtain a written report from the valuer
3. the valuer may be called as a witness if necessary.

H1643 H1037

Benefit Delivery Specialist Operations Team issue guidance (1) on how to get an
expert valuation of
1. real or heritable property (see H1020 4.)
2. the assets of a business
3. investments
4. shares which are not quoted on the Stock Exchange, such as shares in a
private company
5. an interest in a trust
6. current rights to capital
7. capital which is outside the UK.
1 Valuation of Capital Assets Handbook

H1644 Bank, post office and building society accounts

To calculate the value of a deemed share in a bank, post office or building society
account the DM should establish
1. the amount that is jointly owned by the claimant and the other beneficial
owners (see H1135) and
2. the value of the deemed share by dividing the amount jointly held by the
number of beneficial owners.
Note:
If the account is with an institution that is in financial difficulty, an expert
valuation of the value of the deemed share should be obtained.

H1645 Other assets

An expert opinion should be obtained as to what a willing buyer would in reality be
prepared to pay to a willing seller for the deemed or actual share. The DM should
then deduct
1. 10% if there would be any expenses of sale and
2. the amount of any encumbrances secured on the asset (1).
1 UC Regs, reg 49(1)

H1646 Value of a deemed or actual share in a capital asset outside the UK

The value of a deemed or actual share in a capital asset outside the UK depends on
whether or not the country will allow money to be transferred to the UK.

H1647

The onus is on the claimant to provide a letter from a bank of the country where the
asset is held, or a letter from the Embassy of the country concerned. If there are
difficulties getting this information, Benefit Delivery Specialist Operations Team will
take expert advice from the Valuations Office in London.

H1648 H1263

The value of the deemed or actual share of the capital asset is
1. the market value of the deemed or actual share where there is no ban on the
transfer of money to the UK or
2. if there is such a ban, the amount it would raise if it was sold in the UK to a
willing buyer (1).
Note: In most cases an expert valuation of the value of the deemed share will be
needed.
1 UC Regs, reg 49(2)

H1649 Business assets

Business assets are the things which are risked and used in the business. Business
assets can include
1. capital which may be in a bank or building society account, some other
investment, or cash
2. money owed to the business, which is a current right to capital
3. business premises, including the lease on such premises
4. machinery and equipment such as
4.1 cars and vans
4.2 sewing and gaming machines
4.3 work benches and display cabinets
4.4 refrigerators and freezers
4.5 computer equipment and facsimile machines
4.6 desks and chairs
5. stock, including livestock such as cows and horses.

H1650 Value of business assets

The current market or surrender value or price of each business asset is needed. So
if there are 30 sewing machines the DM has to decide the current market value or
price of each machine.

H1651 Encumbrances secured on business assets

Only debts which are encumbrances secured on the business asset are deducted.
So if suppliers are owed money and their debt is not secured on any of the business
assets no deduction is made.

H1652

A bank may have a floating charge on the business assets if the business has an
overdraft. A floating charge is an encumbrance secured on each business asset.
The amount to deduct from the total value of all the business assets is the amount
overdrawn on the date of claim, revision or supersession.

H1653 Funds held by the Court of Protection

When a mentally sick or disabled person has funds held by the Court of Protection
(see H1277 et seq), those funds should be valued in accordance with H1602
H1608. The person's incapacity does not affect this (1).
1 R(IS) 9/04

Example

Veronica lives in a care home and makes a claim for UC. She has capital of 82,000
which was inherited from her father and is held by the Court of Protection.
Veronica's brother, Henry, is her Deputy. Henry states that Veronica's capital has
negligible value because of her incapacity. However, the DM decides that Veronica
is not entitled to UC because the value of her capital exceeds 16,000.

[H1654-H1655]

H1656 Individual savings account

An individual savings account is an investment. People can invest up to a certain
amount of money in one in each tax year if they are
1. 16 or over and
2. resident or ordinarily resident in the UK for tax purposes.
The value of an individual savings account is what people would get if they withdrew
their investment on the date of claim or supersession. Any income, which is paid out
of an individual savings account, is income from capital and should be added to the
claimant's capital from the day it is due to be paid to them (1).

1 UC Regs, reg 72(3)

H1657

Normally, a mortgage is an encumbrance secured on the property bought with the
mortgage. If someone says they are using an individual savings account to pay off
their mortgage this is not likely to be an encumbrance secured on the individual
savings account and it should be valued as such.

H1658

It is a requirement of the regulations that the individual savings account remain in
the beneficial ownership of the investor (1).
1 The Individual Savings Account Regulations 1998 para 4(6)
Note: If there is evidence that the individual savings account or personal equity plan
was taken out at the same time as the mortgage and it can be shown that the lender
had an equitable charge over the individual savings account or personal equity plan
then it may constitute an equitable charge and they should be valued taking that into
account.
Stocks and shares quoted on the London Stock Exchange

H1659 Value of stocks and shares H1669

Initially, a claimant will be asked to value their shares themselves. If the DM needs
to be involved in valuing the stocks and shares, the value can be obtained from the
financial pages in a newspaper which is dated the same date as the date of claim or
supersession. A newspaper gives the price for most of the stocks and shares
quoted on the London Stock Exchange. A valuation using the price given in a
newspaper is not an exact valuation.

H1660

To decide if an exact valuation is needed, first work out the value of the stocks and
shares using the price given in a newspaper. An exact valuation is always needed if
the price of a stock or share is not given in a newspaper.

H1661

To work out the value of stocks and shares from the price given in a newspaper
1. find the price of the stock or share in a newspaper which is dated the same
date as the date of claim or application for supersession and
2. multiply the figure at 1. by the number of that stock or share the person has.

H1662

An exact valuation is needed if the value of the stocks or shares are close to the
lower or upper capital limits or there is a change to the amount of assumed yield
when the value is added to any other capital the claimant and partner has (1).

1 R(IS) 18/95

H1663 H1664

To work out the exact value of stocks and shares
1. use the Shares Wizard tool available on the Intranet A-Z to find the highest
and lowest price for the day before the date of claim or supersession and
2. deduct the lowest price from the highest price and
3. divide the figure at 2. by four and
4. add the figure at 3. to the lowest price and
5. multiply the figure at 4. by the number of that stock or share the person has.

H1664

Once the share value has been calculated as in H1663, deduct 10% costs of sale as
per H1602 et seq, rounding down in the claimant's favour at the last stage in the
calculation.

Example

Roy has 250 Marks and Spencer shares. The highest and lowest share prices for
the day before the date of claim is 4.1750 and 4.1250 respectively.
Deduct the lowest from the highest price (4.1750 - 4.1250) = 0.05
Divide 0.05 by 4 = 0.0125
Add 0.0125 to the lowest share price (0.0125 + 4.1250) = 4.1375
Multiply 4.1375 by the number of share (250) = 1034.3750
Deduct 10% expense of sale = 930.93.

H1665 Encumbrances secured on stocks and shares

Stockbrokers have an encumbrance secured on stocks or shares if the person they
have bought the stocks or shares for has not paid
1. the broker for them or
2. the broker's commission (1).
1 R(IS) 18/95
The encumbrance is secured only on the stocks and shares which have not been
paid for or on which commission has not been paid. The encumbrance is not
secured on any other stocks and shares which the stockbroker buys for the person.

H1666

The amount of the encumbrance is the amount owed to the stockbroker.

H1667 Government securities

Government
Securities
are stocks issued by the British Government. They are sold
in 100 units but re-investments can be for different amounts. Government
Securities include
1. consolidated stock
2. conversion loan
3. exchequer stock
4. funding stock
5. Treasury stock
6. 3%
War
Loan.

H1669

The value of Government Securities should be worked out in the same way as for
stocks and shares (see H1659 et seq).

H1670

The Shares Wizard tool available on the Intranet A-Z will provide DMs with a value
provided the stock has not reached the date when the capital invested is repayable.
If that date has been reached, the claimant should be advised to write to the Historic
Price Service, London Stock Exchange, Old Broad Street, London EC (2)N 1HP. Any
cost imposed by this service would be payable by the claimant. Information can be
obtained from the London Stock Exchange website. However, this only holds data
from 1999 onwards.

H1671

(7) - H1672
Unit trusts

H1673 Value of unit trusts

To work out the value of a unit in a unit trust
1. find the bid price for a unit in the trust in a newspaper which is dated the
same date as the date of claim or application for supersession and
2. multiply the figure at 1. by the number of units a person has.

H1674 Costs of sale

Persons apply to the manager of the trust to withdraw their money so there are no
costs of sale. This applies even if persons use an agent, such as a stockbroker.
Value of capital in certain cases

H1675 Bank and building society accounts

A person who has money in a bank or building society account has a right to capital.
The value of the rights to capital is the balance in the account on the date of claim or
application for supersession because it is assumed the bank or building society will
be able to pay out the money when asked.

H1676

An expert valuation of a right to capital is needed if there is something which stops
people getting their money out of a bank or building society account, such as the
1. person is the beneficial owner of the money in the account and not the legal
owner and the legal owner will not withdraw the money or
2. bank or building society has gone into liquidation.

H1677 Right to receive income

An expert valuation is needed of the value of the right to receive an income if the
income can be signed over to another person.

H1678

Income which cannot be signed over to another person is
1. periodical maintenance payments
2. public service pensions, such as a civil service pension
3. SS benefits and allowances, such as CHB.

H1679 Shares in a private company

Shares in a private company are not quoted on the London Stock Exchange so an
expert valuation is needed.

H1680

The value of the shares is not worked out by dividing the value of all the shares in
the company by the number of shares a person has (1). If the company's auditors say
what a fair value is the expert valuation cannot be more than this figure and is more
likely to be less (2).

1 R(SB) 18/83; 2 R(IS) 2/90

H1681

The expert valuation should take into account
1. anything in the articles of association which restricts the sale of the shares,
such as the shares can only be sold
1.1 to the other shareholders and the shareholders will not buy them or
1.2 if the directors agree and they do not agree and
2. whether the person's shares in the company are a minority, equal or
controlling interest.

[H1682-H1744]

H1745 How to work out the total amount of capital

For each person add together the total of actual capital, income treated as capital
and notional capital. This is the total amount of capital each person has.

H1746

The total amount of capital a claimant has is the total amount of
1. the claimant's capital if the claimant is a single claimant or
2. the combined capital of both members of a couple where it is a joint
claimant (1).

1 WR Act 12, s 5

H1747

Where the claimant is a member of a couple but claims as a single person, the
claimant's capital is to be treated as including the capital of the other member of the
couple (1).

1 UC Regs, reg 18(2)

H1748

Where the person claiming as a single person is party to a polygamous marriage (1),
no account is taken of the capital of their spouse or any other parties to the
polygamous marriage.
1 UC Regs, reg 3(4)

H1749 Notional capital

The DM has to decide if a person has notional capital if the total of actual capital
and income which is treated as capital is 16,000 or less (1).

1 R(SB) 45/83

H1750

The total amount of notional capital for each person is the total of the value of each
item of notional capital that person has.

[H1751-H1759]

Effect of capital on benefit

H1760 When claimant cannot get benefit

Claimants cannot get benefit if the total amount of capital is more than 16,0001.
1 WR Act 12, s 5; UC Regs, reg 18

H1761 Assumed yield from capital H1902 H1902

Claimants are treated as having an assumed yield of 4.35 a month for
1. each complete 250 of capital over 6,000 up to and including 16,000 and
2. any capital which is left and which is not a complete 2501.
See Appendix 1 to this Chapter for a table which shows how to work out assumed
yield.

1 UC Regs, reg 72(1)

H1762

Assumed yield does not apply (1) where
1. the capital has been disregarded or
2. the actual income from that capital is taken into account where that income is from
2.1 an annuity or
2.2 a trust.

1 UC Regs, reg 72(2)

H1763

Where assumed yield has been applied, any actual income that comes from the
capital such as rent, interest or dividends, should be treated as part of the person's
capital from the day it is due to be paid to the person (1).
1 UC Regs, reg 72(3)

H1764 When capital does not affect benefit

Capital does not affect what benefit claimants can get if their capital is 6,000 or
less.

[H1765-H1794]

Deprivation of capital

H1795 The law H1257

The law says people are treated as having capital they do not have if they deprive
themselves of capital to get UC or more UC (1). The capital people are treated as
having is called notional capital.

1 UC Regs, reg 50(1)

H1796 H1815

People are not treated as having capital of which they have deprived themselves if
1. it reduces or pays a debt owed by the person or
2. they purchase goods and services and that expenditure was reasonable in
the circumstances of that person's case (1).
1 UC Regs, reg 50(2)

H1797 Who the law applies to

The law applies to claimants and partners only if they were the beneficial owner or
joint beneficial owners of the capital. So if a claimant is the joint beneficial owner of
a building society account which has 10,000 in it and the claimant's share is
4,000 the law
1. applies if the claimant spends or gives away that 4,000 or any part of it for
the purpose of getting benefit or more benefit and
2. does not apply if the other 6,000 or any part of it is spent or given away.

H1798

The law does not apply to claimants and partners if another person, such as
1. an appointee appointed by the DM to act for the claimant or
2. someone with power of attorney (unless H1290 applies)
deprives claimants' of their capital. H1289 gives guidance on how to treat claimants
capital in these circumstances.

H1799

DMs should decide the question of deprivation each time benefit is claimed because
1. a decision on a claim is final and
2. any fact found or determination made in connection with that decision cannot
be carried forward to decide the next claim (1).
1 SS Act 98, s 17

[H1800-H1814]

Have people deprived themselves of capital

H1815 Meaning of deprive H1175 H1290

The meaning of deprive is not a question of law and should be given its normal
every day meaning (1). So claimants have deprived themselves of capital if they no
longer have it even if they use it to get other capital (2) or personal possessions.
Note: This is subject to the provisions of H1796. So for example a person may have
bought a second car but they are single and can provide no reason for why they
need 2 cars, so the DM does not think the expenditure was reasonable.
1 R(SB) 40/85; 2 R(SB) 40/85

H1816 Onus of proof

People have to show they no longer have capital (1).
1 R(SB) 38/85

H1817 Evidence that people no longer have capital

Evidence that people no longer have capital can include
1. a conveyance which shows ownership of real or heritable property (see H1020 4.), such as a house, has been transferred to another person or
2. a deed, such as a deed of
2.1 gift or
2.2 trust or
2.3 settlement
which shows capital has been given to another person or
3. receipts which show
3.1 what the capital has been spent on or
3.2
which debts have been paid out of the capital.

H1818 What the DM decides

The DM decides if a single claimant or a partner for joint claimants have
1. the capital or
2. deprived themselves of it.
DMs do not have to decide if single claimants or partners have deprived themselves
of capital for the purpose of getting benefit or more benefit if they decide claimants
or partners still have the capital. Such capital is included when working out what
actual capital the claimant or partner has.

H1819

DMs should decide claimants or partners have actual capital if
1. there is evidence to show claimants or partners had the capital and
2. claimants or partners cannot show they no longer have it (1).
1 R(SB) 38/85

H1820 Evidence which may show people had capital

Evidence which may show people had capital can include information
1. given when UC was claimed or claimed previously, such as when claimants
have said they
1.1 had capital and do not say they have capital now or
1.2 owned the house in which they used to live and do not say what has
happened to the house when they move into accommodation they do
not own or
2. information from another source, such as from the former employer, which
shows claimants have got a one-off payment.

[H1821-H1824]

Have people deprived themselves of capital for the purpose of getting UC or more UC

H1825 Onus of proof

DMs have to show the claimant's or partner's purpose was to get UC or more
benefit if they decide claimants or partners have deprived themselves of capital (1).
Getting UC or more UC may not be the claimant's or partner's predominant purpose
but it must be a significant one (2). So when claimants give away all their capital to a
relative just before claiming UC their
1. main, or predominant, purpose may be to benefit the relative and
2. intention, or significant purpose, may be to reduce their capital so they can
get UC or more UC.
1 UC Regs, reg 50(1); 2 R(SB) 40/85

H1826 What the DM decides

DMs have to decide if the claimant's or partner's significant purpose was to get UC
or more UC. The DM has to make such a decision each time claimants or partners
deprive themselves of capital. So if a claimant has spent their capital on several
things the DM has to decide the claimant's purpose for each act of deprivation.

H1827

Normally there is no direct evidence to show the claimant's or partner's purpose was
to get UC or more UC. So the DM has to consider all the facts of each case when
making the decision (1).
1 R(SB) 9/91

[H1828-H1829]

Facts which the DM should consider

H1830 Were people mentally capable when they deprived themselves of capital

Claimants or partners who are not mentally capable have not deprived themselves
of capital for the purpose of getting UC or more UC if they were not mentally
capable at the time they deprived themselves of capital.

H1831

Such claimants or partners have actual capital if they gave their capital to another
person because the gift is not valid. The person who has been given the capital is
holding it on trust for the claimant or partner

H1832 Did claimants have a choice when they deprived themselves of capital

The DM has to decide why claimants or partners chose to deprive themselves of
capital when they did if they had a choice in the matter (1). The fact that claimants had
a choice does not mean their purpose was to get UC or more UC. It is a fact which
the DM should take into account when deciding the claimant's or partner's purpose.

1 R(SB) 12/91

H1833

Claimants or partners have no choice if they use their capital to pay
1. for the necessities of life, such as food and fuel or
2. debts or
3. the Department to repay an overpayment.
Claimants or partners who had no choice have not deprived themselves of capital to
get UC or more UC.

H1834

Claimants or partners have a choice if they
1. give their capital away
2. spend their capital extravagantly or imprudently even if they say they have
used it to pay for the necessities of life
Note:
See H1339 if a person has a certain and immediate liability to repay capital
that has been given to them.
1 R(SB) 12/91

[H1835-H1839]

H1840 Did people know capital affects the amount of universal credit they can get

Claimants or partners have not deprived themselves of capital for the purpose of
getting UC or more UC if they did not know that the capital they have deprived
themselves of would affect the amount of UC they could get (1).

1 R(SB) 12/91

H1841

DMs have to show claimants or partners did have such knowledge if they are to
decide the purpose was to get UC or more UC. Facts which the DM should consider include
1. previous claims for UC or other means-tested benefits (IS, JSA for example)
which may show claimants or partners
1.1 did not get UC/other means-tested benefits, or got a reduced amount,
because of the capital they had or
1.2 have been told about the effect of capital on UC/other means-tested benefits
2. official forms and leaflets which claimants or partners have been given when
claiming UC/other means-tested benefits (1) and
3. the claimant's or partner's educational standing (2).
1 R(SB) 12/91; 2 R(SB) 12/91

H1842 Did people say what they were going to do with their capital

Claimants or partners have not deprived themselves of capital for the purpose of
getting UC or more UC if they
1. say exactly what they are going to do with their capital and
2. are told by an officer of DWP it will not affect the amount of UC they can get
and
3. do what they said they were going to do with their capital.

H1843

However, DMs should consider whether claimants or partners have deprived
themselves of capital for the purpose of getting UC or more UC if they
1. say exactly what they are going to do with their capital and
2. are told by an officer of DWP it will affect the amount of UC they can get and
3. do what they said they were going to do with their capital.

H1844 When did people deprive themselves of capital

The DM should consider the date claimants or partners deprived themselves of
capital. Such a fact is more relevant if deprivation is near to the date of the claim or
the date the claimant's circumstances change (1).

Example

Ruth has been in receipt of UC since 2013. On 25.2.15 she transfers legal and
beneficial ownership of her house to her daughters and goes to live with her sister.
Ruth says that she transferred ownership of her home to her daughters so they still
had somewhere to live when she went to live with her sister. The DM decides that
there are grounds to revise or supersede the decision awarding UC to Ruth. The
DM also decides that, although her predominant motive was to provide a home for
her daughters, a significant purpose was to receive UC. The DM therefore decides
that Ruth deprived herself of the value of her house in order to receive UC.
1 R(SB) 9/91

H1845 What are people going to live on after they have deprived themselves of capital

The DM should consider what claimants or partners say they are going to live on
after they have deprived themselves of capital. Such a fact is more relevant if they
have no other capital or income to live on (1).

1 R(SB) 9/91

H1846

The DM cannot decide the purpose of the deprivation was to get UC or more UC if
the only fact is that after depriving themselves of capital
1. claimants or partners should have realized or
2. the effect of it would be
they would need UC (1).
1 R(SB) 40/85

[H1847-H1873]

Person treated as sole owner or partner in a company

H1874 The law H1876 H1880 H1882

Where a person works in a company
1. in a situation similar to that of a sole owner or partner and
2. that company is carrying on a trade or a property business (1)
that person shall be treated as a sole owner or partner (2).

1 Corporation Tax Act 09, s 204; 2 UC Regs, reg 77(1)

H1875

"Property business" refers to a person deriving income from property (usually in the
form of rent) but not as part of carrying on a trade. So this would be a person who
bought one or more properties for investment. So where a person has put such
property in the name of the company the property will be treated as part of the
claimant's capital and no disregard would apply (1).

1 UC Regs, reg 77(3)(a)

H1876

Where H1874 above applies
1. the value of the person's holding in the company is disregarded when working
out what capital the person has and
2. the person is treated as having capital which is equal to
2.1 the value of the capital of that company or
2.2
the person's share of the value of the capital of that company
depending on whether they are like a sole owner or a partner (1).
1 UC Regs, reg 77(2)

H1877 Like a sole owner or partner

Whether a person who has shares in a company is like a sole owner or partner in
the business of that company is a question of fact in each case (1). A person who does
not work for the company can be like a sole owner or partner (2).

1 R(IS) 8/92; 2 R(IS) 8/92

H1878

The sole owner of a business has total influence over the day to day running of the
business. When a business is jointly owned the number of partners is normally small
and the influence a partner has over the day to day running of the business will
depend on the terms of the partnership agreement. So for a person to be like a
1. sole owner in the business of the company that person should have total
influence over the day to day running of the company, such as when a person
owns 99% of the shares in a company (1) and
2. partner in the business of the company the
2.1
number of shareholders in the company should be small and
2.2 person should have some meaningful influence over the day to day
running of the company (2).

1 R(IS) 13/93; 2 R(IS) 8/92

H1879

A person who has some shares in a company which has a large number of
shareholders, such as BP, is an investor because such a person has no influence
over the day to day running of the company (1).

1 R(IS) 8/92

H1880 H1881

Where
H1874 applies (1) in respect of a company which is carrying on a trade
1. any assets of the company that are used wholly or mainly for the purposes of
the trade are disregarded from the persons capital while they are engaged in
activities in the course of that trade (2) and
2. the income or the person's share of the income of the company is treated as
the person's income and calculated as if they were self-employed earnings (3)
(see ADM Chapter H4: Earned income - self-employed earnings) and
3. where the person's activities in the course of their trade are their main employment
3.1 the person is treated as if they were in gainful self-employment and
3.2 the minimum income floor (see ADM Chapter H4: Earned income - self-
employed earnings) applies in relation to any assessment period where
the person's earned income is below the specified amount (4).

1 UC Regs, reg 77(3); 2 reg 77(3)(a); 3 reg 77(3)(b); reg 57; 4 reg 77(3)(c); reg 62

H1881 H1882

Any self-employed earnings that a person is treated as having as in H1880 2. above
are in addition to any employed earnings that the person receives as a director or
employee of the company (1).

1 UC Regs, reg 77(4)

H1882

Where a person's earnings come from working through a company as an
intermediary or through a managed service company (generally to avoid national
insurance) then such earnings are not to be calculated as if they were self-
employed and the guidance at H1874 to H1881 will not apply (1). Income under these
arrangements is covered by PAYE and so is counted as employed earnings (2).
1 UC Regs, reg 77(5); ITEPA 03, Pt 2 Chap 7

[H1883-H1884]

What is the amount of notional capital

H1885 How to work out the amount of notional capital

The amount of notional capital is worked out in the same way as if the person has
the capital and this includes applying appropriate disregards.

H1886 What the DM decides

The DM decides
1. what notional capital can be disregarded (see ADM Chapter H2: Capital
disregards) and
2. the value of notional capital which cannot be disregarded (see H2601).

[H1887-H1890]

Value

H1891 Capital of a company

Normally a person has no beneficial interest in the capital of a company. But if a
person who has shares in a company is treated as a
1. sole owner or
2. partner
in the business of the company the person is also treated as having the value or a
share of the value of the capital of the company if it is not disregarded.

H1892

The value of the capital of the company is the net value of the capital of that
company. The net value is the difference between
1. the total value of the capital of the company and
2. the amount of any liabilities the company has (1).
It is not the value of some of the capital of the company (2).
Note:
An expert valuation will be needed if the company's auditors do not provide
evidence of the net value of the capital of the company.

1 R(IS) 13/93; 2 R(IS) 13/93

H1893

The value the person is treated as possessing is
1. all the value if the person is treated as a sole owner and
2. a share of the value if the person is treated as a partner.
The share at 2. is the same fraction as the fraction of shares the person has in the
company. So a person who has 40 out of a 100 shares in a company has a two
fifth's share of the value.

H1894

H1895 Capital spent on a resource which is not worth as much

If claimants or partners have deprived themselves of capital to get UC or more UC
and they spent their capital on a resource which is not worth as much as the capital
spent, the value of notional capital is the difference between the value of the
1. capital spent and
2. resource which was bought (1).
Note:
This may apply when a person has spent capital on personal possessions to
get UC or more UC because personal possessions are not normally worth as much
as a person paid for them. The DM should not consider any further increase in the
difference between the amount paid for a personal possession and its current
market value (2).

Example

Jens makes a claim for UC. Two weeks before making his claim, Jens buys a car for
7,250. The DM decides that Jens bought the car to get benefit. When Jens makes
his claim the value of the car is 6,500. The DM decides that Jens has actual capital
of 6,500 and notional capital of 750. Although the value of the car reduces, the
DM does not make an increase in the amount of notional capital.
1 R(SB) 38/85; 2 R(IS) 8/04

H1896 Capital which people have deprived themselves of

If claimants or partners deprive themselves of capital to get UC or more UC the
value of the capital they are treated as having is the difference between
1. its value on the date of claim, revision or supersession and
2. the amount of any reduction under the diminishing notional capital rule (1).
1 UC Regs, reg 50(3)

[H1897-H1899]

Diminishing notional capital rule

H1900 The law

The law says
1. when the amount of notional capital should be reduced and
2. how the amount of the reduction is worked out (1).
1 UC Regs, reg 50

H1901 What the DM decides

The DM decides
1. when the capital a claimant is treated as having because of deprivation
should be reduced and
2. the amount of the reduction.

H1902 The diminishing notional capital rule

Where a claimant is treated as having capital because of deprivation, the amount of
capital reduces (1) for each subsequent assessment period (2) (see ADM Chapter E2:
Awards, benefit units and maximum amounts, for meaning of assessment period),
or where the award has terminated, each subsequent month, where the notional
capital exceeds
1. 16,000, by the amount of an award of UC that would be made to that person
assuming they met the other basic and financial conditions for UC if it were
not for the notional capital or
2. 6000 but not 16,000 (including where the notional capital has reduced
below 16,000 as in 1. above), by the amount of assumed income generated
by that capital (3) (see H1761).
1 UC Regs, reg 50(3); 2 reg 21; 3 reg 72(1)

[H1903-H1999]

Appendix 1
How to work out monthly assumed yield - H1761
Total capital
Assumed yield
From
To
NIL 6,000.00
NIL
6,000.01 6,250.00
4.35
6,250.01 6,500.00
8.70
6,500.01 6,750.00
13.05
6,750.01 7,000.00
17.40
7,000.01 7,250.00
21.75
7,250.01 7,500.00
26.10
7,500.01 7,750.00
30.45
7,750.01 8,000.00
34.80
8,000.01 8,250.00
39.15
8,250.01
8,500.00
43.50
8,500.01
8,750.00
47.85
8,750.01
9,000.00
52.20
9,000.01
9,250.00
56.55
9,250.01 9,500.00
60.90
9,500.01
9,750.00
65.25
9,750.01
10,000.00
69.60
10,000.01 10,250.00
73.95
10,250.01 10,500.00 78.30
10,500.01 10,750.00 82.65
10,750.01 11,000.00 87.00
11,000.01 11,250.00 91.35
11,250.01 11,500.00 95.70
11,500.01 11,750.00
05
100.
11,750.01 12,000.00 104.40
12,000.01 12,250.00 108.75
12,250.01 12,500.00
10
113.
12,500.01 12,750.00 117.45
12,750.01 13,000.00 121.80
13,000.01 13,250.00
15
126.
13,250.01 13,500.00 130.50
13,501.00 13,750.00 134.85
13,750.01 14,000.00
20
139.
14,000.01 14,250.00 143.55
14,250.01 14,500.00 147.90
14,500.01 14,750.00
25
152.
14,750.01 15,000.00 156.60
15,000.01 15,250.00 160.95
15,250.01 15,500.00
30
165.
15,500.01 15,750.00 169.65
15,750.01 16,000.00 174.00
16,000.01 and over
claimant cannot get benefit