Chapter H2: Capital disregards
ContentsIntroduction
| H2001: | The law |
| H2002: | Onus of proof |
| H2003: | What the DM decides |
Business assets
| H2021: | The law |
| H2022: | Meaning of business assets |
| H2024: | Meaning of gainful self-employment |
| H2026: | When people are working in the business |
| H2028: | Personal injury compensation payments |
| H2031: | The law |
| H2037: | Premises which have not been occupied as the home |
| H2038: | Premises not occupied as the home for a time |
| H2039: | Croft and small holdings |
| H2040: | More than one set of premises owned |
| H2043: | The law |
| H2044: | Investments which include life insurance |
| H2045: | Money deposited with a housing association |
Occupational and personal pensions
| H2046: | The law |
| H2047: | Payment made to holders of the Victoria Cross or George Cross |
Premises lived in by a close relative
| H2048: | The law |
| H2050: | Premises occupied by former partner |
| H2051: | Special compensation scheme |
| H2053: | Payment included with other capital |
| H2055: | Evidence |
| H2057: | Funeral plan contract |
| H2090: | Local authority payments |
| H2091: | Arrears of benefits |
| H2092: | Personal injury payment |
| H2093: | The social fund |
| H2110: | Capital disregarded for up to 6 months |
| H2111: | Premises intended to be occupied |
| H2113: | Is it reasonable to disregard for longer |
| H2114: | Premises ceased to be occupied |
| H2115: | Premises person is trying to sell |
| H2116: | Is it reasonable to disregard for longer |
| H2117: | Business assets |
| H2118: | Is it reasonable to disregard for longer |
| H2119: | Amount to be used to purchase premises |
| H2120: | Is it reasonable to disregard for longer |
| H2121: | Amount from insurance policy |
| H2122: | Is it reasonable to disregard for longer |
| H2123: | Amount for repairs |
| H2124: | Is it reasonable to disregard for longer |
Chapter H2: Capital disregards
IntroductionH2001 The law
All capital is to be taken into account unless it is to be (1)1. treated as income or
2. disregarded.
1 UC Regs, reg 46(1)
H2002 Onus of proof
The claimant has to show that the capital can be disregarded. If there is no evidenceto show capital can be disregarded, it is included when working out the amount of
capital a claimant and their partner has.
H2003 What the DM decides
The DM decides if capital can be disregarded1. at the date of claim, revision or supersession and
2. before it is valued.
The DM does not have to know the value of capital to decide if it can be
disregarded.
H2004
H2005
Capital is disregarded (1)1. indefinitely
or
2. for a period of up to 12 months or
3. for a period of up to 6 months or
4. for more than 6 months if it is reasonable.
1 UC Regs, reg 48; Sch 10
[H2006-H2020]
Capital disregarded indefinitelyBusiness assets
H2021 The law
Assets which are used wholly or mainly for the purposes of a trade, profession orvocation which the person is carrying on, are disregarded indefinitely (1).
1 UC Regs, Sch 10, para 7
Example
John owns an amusement arcade in Bournemouth. He stopped working in thearcade on 31 October and claimed UC on 3 November. The assets of the business
are a lease on the building, gaming machines and tools used to repair the
machines. John states the value of these assets is £45,000. John also states that he
is not going to sell the assets because he needs them when he opens the arcade
again in the following April. The DM decides that the assets of the business can be
disregarded.
Note: A different disregard applies if persons are not able to work in the business
because they are ill or physically or mentally disabled and are going to start or
return to work in the business (see H2117).
H2022 Meaning of business assets
Business assets include standard items such as machinery, vehicles, fixtures andcash held in the bank (including money held following the sale of assets). They may
also include items such as customer lists and contacts, current and future contracts
and goodwill.
H2023
In the event of their sale, assets may result in an income or capital receipt. A sale ofan asset such as "work in hand" may result in an income receipt and so would be
appropriate for inclusion in the profit and loss account (1). Where doubt exists as to
whether a particular asset would represent a capital or income receipt upon its sale,
the principles of commercial accounting must be applied i.e. the approach that
would be taken by an accountant or the HMRC to such a receipt or holding.
1 UC Regs, reg 57(3)
H2024 Meaning of gainful self-employment
A claimant is in gainful self-employment if for the purposes of UC, the Secretary ofState has determined that
1. the claimant is carrying on a trade, profession or vocation as their main
employment and
2. the earnings from 1. above are self-employed earnings and
3. the trade, profession or vocation is organised, developed regular and carried
on in expectation of profit (1).
Note: Please see chapter H4: Earned Income: self-employed earnings for details.
1 UC Regs, reg 64
H2025
People can be in gainful self-employment even if they have another job as anemployee.
H2026 When people are working in the business
People are working in the business if they do some work for the business in apractical sense. There is no set definition of the type and amount of work that has to
be done for the person to be classed as carrying on a trade, profession or vocation
and the DM must decide each case on its merits (1).
1 R(IS) 14/98
H2027
A partner in a business managed and worked exclusively by others is not working inthe business. Such people are often known as a "sleeping partner". Even if that
person receives a share of the profits of the business he is not engaged in that
trade, profession or vocation (1).
1 R(IS) 14/98
H2028 Personal injury compensation payments « H2092
Where a person has been awarded a sum in consequence of a personal injury tothat person and the sum is
1. held in trust or
2. administered on behalf of that person by the court or
3. only able to be disposed of by the direction of the court
the amount shall be disregarded from the calculation of the person's capital (1). (See
also H2092.) Payments made from the Criminal Injuries Compensation Fund will be
included in this disregard.
1 UC Regs, reg 75(1), (4) & (5)
H2029
The meaning of made "in consequence of a personal injury" can include where theclaimant's solicitor fails to secure the personal injury payment and the claimant sues
their solicitor for professional negligence and receives a compensation payment to
the value of what they should have received. However if any damages are also paid
for any additional loss created by the professional negligence then this would not be
disregarded (1).
Note
1: Payments of income from the trust are income from capital. However such
income is disregarded (see ADM Chapter H5: Unearned income).
Note
2: This disregard does not apply if the injury was to a claimant's deceased
partner (2).
Note 3: A payment made in relation to the costs of care associated with an
unwanted child in a "wrongful birth" case is a payment made because of a personal
injury, for instance in the case of a failed sterilisation or vasectomy.
1 KQ v SSWP (IS) [2011] UKUT 102 (AAC); [2011] AACR 43; 2 R(IS) 3/03
H2030
Payments can only come within this disregard where the claimant or partner forwhom the payment was made themselves suffered a physical and/or psychological
injury. If there is any doubt as to what the payment was awarded for, then the DM
should request sight of the papers awarding the amount. These should specify on
what basis the award was made.
Example 1
Peter's wife was killed in a road traffic accident and he was awarded £36,000 whichcovered loss of earnings. As the award was not due to Peter suffering any injury to
himself, then this amount would be taken in account when calculating his capital.
Example
2
Fiona received £100,000 as the result of an assault on her partner which resulted in his death. The award was for the psychological injury to Fiona arising from her
witnessing the attack. As the amount was awarded for the injury to Fiona, the
amount is disregarded in calculating her capital.
Premises occupied as the home
H2031 The law
The premises occupied by a person as their home is disregarded indefinitely. Onlyone set of premises can be disregarded (1). In some circumstances, more than one
property can make up the premises occupied as the home (2).
1 UC Regs, Sch 10, para 1; 2 Secretary of State v. Miah; R(JSA) 9/03
[H2032-H2036]
H2037 Premises which have not been occupied as the home
Premises which1. have been bought and
2. have not been lived in as the home by the claimant or any member of the
claimant's family cannot be disregarded (1) as premises occupied as the home.
1 R(SB) 27/84
H2038 Premises not occupied as the home for a time
Premises usually occupied as the home are disregarded if1. they are not occupied for a time and
2. the intention is to return to live in the premises as the home.
For example, if a person goes into residential care on a temporary basis and intends
to return to the house which the person usually occupies as the home, the house is
disregarded.
H2039 Croft land and small-holdings
Croft land and small-holdings can be treated as part of the premises occupied asthe home if they cannot be sold separately.
H2040 More than one set of premises owned
If a claimant owns more than one set of premises, the DM will have to decidewhether each set of premises can be disregarded as the premises occupied by a
person as their home. Where a claimant has only one home that is spread over two
physical buildings the DM should decide that each is the premises occupied as the
home if each is normally occupied by the claimant.
H2041
Factors the DM should consider when deciding whether the claimant has only onehome are
1. the proximity of the premises, the closer premises are to each other the more
likely they are to be one home
2. who lives in each of the premises, for example whether
2.1 each of the premises is occupied by members of the claimant's family
(see ADM Chapter E2: Awards, benefit unit and maximum amount) or
2.2 one of the set of premises is occupied solely by non-dependants
3. the reason for the purchase of more than one set of premises, for example
whether it was
3.1 to avoid statutory overcrowding (1) or
3.2 an investment opportunity or
3.3 to have a
3.3.a
weekend retreat or
3.3.b
country cottage.
If 2.2, 3.2 or 3.3 apply, the DM should decide that the claimant does not have only
one home and therefore only one set of premises would be disregarded as the
premises occupied as the home.
1 Housing Act 1985, s 325 & 326; Secretary of State v. Miah; R(JSA) 9/03
H2042
When considering whether the claimant normally occupies more than one set ofpremises as his home, the DM should decide that the claimant's home is the place
where he
1. lives
2. eats
3. sleeps
4. bathes
5. relaxes
6. enjoys with his family.
Example 1
Keith and Elma have eleven children, eight of whom are at school and three ofwhom are in work. They all lived in a three bedroomed house. When Keith and Elma
are advised of the rules of statutory overcrowding they purchase another three
bedroomed house in the same street. There are two other properties between the
houses Keith and Elma own. Elma and the five youngest children continue to live in
the original house and the other children go to live in the newly purchased house.
Keith lives, sleeps, eats, bathes, relaxes and enjoys with his family the original
house four days a week and the newly purchased house three days a week. Keith is
made redundant and claims UC. The DM decides that Keith normally occupies both
houses. The DM also decides that both houses are disregarded as the premises
occupied as the home.
Example 2
Carys lives in Cambridge and is in receipt of UC. She inherits a cottage in Wales.Carys has relatives who live in Wales. She therefore decides to keep the cottage for
her use when she visits her relatives. The DM decides that the cottage in Wales is
not disregarded as the premises occupied as the home.
Example 3
Bruce owns a house in London. He gets a job in Manchester and buys a flat there tolive in during the week. He spends the weekends at his house in London. Bruce
loses his job and returns to London to claim UC. He states he will live in London but
will visit his flat once a month in order to maintain it and possibly look for work in
Manchester. The DM decides that Bruce does not normally occupy the flat in
Manchester. The DM also decides that the flat in Manchester is not disregarded as
the premises occupied as the home.
Example 4
Adam is single. He lives at 25 Station Road which is a semi-detached house. Thehouse adjoining his, 27 Station Road, comes on the market after being uninhabited
for two years. It is in a derelict condition. Adam buys it cheaply. He sometimes
sleeps and eats at 27 Station Road while he undertakes the necessary repairs in
order to let or sell it but he spends most of his time at 25 Station Road. Adam then
suffers an injury at work and claims UC. The DM decides that as Adam purchased
27 Station Road as an investment it is not disregarded as the premises occupied as
the home.
Example 5
Wasim and his wife Ruksana live in a four bedroomed house. They have twelvechildren. To avoid statutory overcrowding, Wasim and Ruksana buy another house
in the street where they live. Their four eldest children, all of whom are aged over 21
live in this other house and Wasim, Ruksana and their other children do not spend
any time there. Wasim is made redundant and makes a claim for UC. The DM
decides that only the house where Wasim and Ruksana live can be disregarded as
the premises occupied as the home.
Life insurance policies
H2043 The law
The value of a life insurance policy still in force is disregarded indefinitely (1).1 UC Regs, Sch 10, para 9
H2044 Investments which include life insurance
Investments which include some life insurance are disregarded indefinitely if theagreement states how payment on death is worked out. It does not matter whether
the amount paid on death is
1. more than or
2. equal to or
3. less than
the amount the person would get if the investment is surrendered the day before the
date of death (1).
1 R(IS) 7/98
H2045 Money deposited with a housing association « H2119
Money deposited with a housing association is disregarded indefinitely if the moneyhas to be deposited as a condition of living in the home (1). A housing association is a
non-profit making voluntary body formed with the aim of providing good quality low
cost housing (2). See H2119 for disregard where money is deposited with a housing
association to purchase premises.
1 UC Regs, Sch 10, para 12; 2 Housing Association Act 85, s 1(1)
Occupational and personal pensions
H2046 The law
The value of any right to receive a pension under1. an occupational or personal pension scheme (1) or
2. any other registered pension scheme (2) is disregarded indefinitely (3). Note: See ADM H5171 et seq for guidance on notional income. 1 Pension Schemes Act 1993, s 1; Finance Act 2004, s 153; 2 UC Regs, Sch 10, para 10
H2047 Payment made to holders of the Victoria Cross or George Cross
Any payment made to people because they hold the1. Victoria Cross or
2. George Cross
is disregarded indefinitely (1).
1 UC Regs, Sch 10, para 19
Premises lived in by a close relative
H2048 The law
Premises that are occupied as the home by a close relative of a person aredisregarded indefinitely where the close relative has
1. LCW
or
2. reached the qualifying age for SPC (1).
1 UC Regs, Sch 10, para 2
H2049
A close relative in relation to a person means (1)1. parent
2. parent-in-law
3. son
4. son-in-law
5. daughter
6. daughter-in-law
7. step-parent
8. step-son
9. step-daughter
10. brother
11. sister
12. where any of 1. - 11. is a member of a couple, the other member of the
couple.
1 UC Regs, reg 2
H2050 Premises occupied by former partner « H2052
Premises that are occupied by a person's former partner as their home aredisregarded indefinitely where the person and their former partner are not estranged
but are living apart by force of circumstances. For example, where the person is in
long-term care (1).
1 UC Regs, Sch 10, para 3
H2051 Special compensation schemes « H2055
Where a person receives a payment of capital from one of a specified type ofcompensation scheme, such a payment will be disregarded indefinitely from the
calculation of that person's capital (1). The compensation schemes are those
established or approved by the Secretary of State or from a trust established with
funds provided by the Secretary of State and
1. provide compensation in respect of (2)
1.1 a person
1.1.a
having been diagnosed with variant Creutzfeldt-Jakob disease
or
1.1.b being infected from contaminated blood products or
1.2 the 2005 London bombings or
1.3 persons who have been interned or suffered forced labour, injury,
property loss or loss of a child during the Second World War or
2. support persons with a disability to live independently in their
accommodation (3).
1 UC Regs, reg 76(2): 2 reg 76(1)(a); 3 reg 76(1)(b)
H2052
Where a claim for UC is made by the partner, parent son or daughter of a personreferred to in paragraph H2050 1.1 above, a payment of capital received from
1. the scheme or trust in respect of the diagnosed or infected person or
2. the diagnosed or infected person or
3. the estate of the diagnosed or infected person
shall be disregarded as capital if it would be disregarded in relation to an award of
SPC (1).
Note: See paragraph DMG 84426 etc seq and DMG 84462 et seq for guidance on
disregard in SPC.
1 UC Regs, reg 76(3); SPC Regs, Sch V, paras 13 & 15
H2053 Payment included with other capital
If the payment is included with other capital the disregard does not apply to theother capital.
H2054
If money is withdrawn from an account which includes the payment and other capitalaccept the money withdrawn is from the other capital and not the payment. If there
is evidence to show the money withdrawn is from the payment and not the other
capital accept that evidence.
H2055 Evidence
The Secretary of State has agreed the payments from the trusts listed in paragraph H2051above do not have to be declared if they are kept separate from any othercapital that the person has. The person getting the payment is told of this.
H2056
Benefit Delivery Specialist Operations Team will get information about paymentsfrom those trusts or fund if it is needed. The trustees and DH should not be
contacted.
H2057 Funeral plan contract
The value of a funeral plan contract is disregarded indefinitely. "Funeral plancontract" means a contract where a person makes payments to secure the provision
of a funeral in the UK for the person on their death and where the sole purpose of
the plan is to provide for a funeral (1).
1 UC Regs, Sch 10, para 11
[H2058-H2089]
Capital disregarded for up to 12 monthsH2090 Local authority payments
Any payment made by or on behalf of a local authority within the last 12 months, for1. children, young persons and others under certain legislation (1) or
2. welfare needs related to disability or old age (other than living expenses (2))
shall be disregarded when calculating the claimant's capital (3).
1 Children Act 89, s 17, 23B, 23C & 24A; Social Work (Scotland) Act 68, s 12; Children (Scotland) Act 95,
s 29 & 30; 2 UC Regs, reg 66(2); 3 UC Regs, Sch 10, para 17
H2091 Arrears of benefit
Any payment received within the previous 12 months by way of arrears of orcompensation for late payment of certain benefits are disregarded (1). Those benefits are
1. UC
2. an abolished benefit (2), namely
2.1
JSA(IB)
2.2
ESA(IR)
2.3
IS
2.4
HB
2.5
CTB
2.6
CTC
2.7
WTC
3. a social security benefit which is not included as unearned income (3)
1 UC Regs, Sch 10, para 18; 2 WR Act 12, s 33; 3 UC Regs, reg 66(1)(a) & (b)
Example
John received arrears of DLA amounting to £2,400 on 1.10.13. He claims UC on24.02.14. The £2,400 arrears of DLA are disregarded when calculating his capital
up to 30.9.14.
H2092 Personal injury payment « H2028
Where a person has received a payment in consequence of a personal injury but it :1.is not held in trust or
2. has not been used to purchase an annuity or
3. has not been otherwise disposed of
it can be disregarded if it has been paid to the person within the previous 12
months (1). (See also H2028.)
1 UC Regs, reg 75(6)
H2093 The social fund
A payment made from the social fund within the last 12 months will be disregarded (1).1 UC Regs, Sch 10, para 16; SSCB Act 92, Part 8
H2093 - H2109
H2110 Capital disregarded for up to 6 months
In the disregards described below that specify a period of 6 months, that period maybe extended where it is reasonable in the circumstances of the case (1).
1 UC Regs, reg 48(2)
H2111 Premises intended to be occupied « H2112
Premises that a person intends to occupy as their home shall be disregarded incalculating that person's capital where the person
1. has acquired the premises within the last 6 months but has not yet taken up
occupation or
2. is taking steps to obtain possession and they began those steps within the
past 6 months or
3. is carrying out essential repairs or alterations in order to make the premises fit
for occupation and these have been commenced within the last 6 months (1).
1 UC Regs, Sch 10, para 4(1)
H2112
A person is taken to have commenced steps to obtain possession of premises as in H21112. above, on the date that legal advice is first sought or proceedings arecommenced, whichever is the earlier (1).
1 UC Regs, Sch 10, para 4(2)
H2113 Is it reasonable to disregard for longer
The DM may decide1. to disregard the premises for a longer period if for example
1.1 legal proceeding are still being taken or
1.2 people have got possession and there is a good reason why they have
not started to live in the premises
1.3 repairs will take longer than 6 months
2. not to disregard the premises for a longer period if people have for example
2.1 asked for legal advice and not followed it or
2.2 got possession and there is no good reason why they have not moved
into the premises.
H2114 Premises ceased to be occupied
Where a person has ceased to occupy premises as their home followingestrangement from their former partner, those premises can be disregarded from
the calculation of that person's capital where
1. the person has ceased to occupy those premises within the past 6 months or
2. the person's former partner is a lone parent and occupies the premises as
their home (1).
1 UC Regs, Sch 10, para 5
H2115 Premises person is trying to sell
Where a person is trying to dispose of premises, they can be disregarded from thecalculation of that person's capital where they are taking reasonable steps to
dispose of the premises and those steps have been commenced within the last 6
months (1).
1 UC Regs, Sch 10, para 6
H2116 Is it reasonable to disregard for longer
The DM may decide to disregard the premises for a longer period where forexample the person has done all they can to sell the premises and the asking price
is no more than the premises are worth.
H2117 Business assets « H2021
Where a person has ceased to be engaged in that business within the last 6 months1. and is taking reasonable steps to dispose of those assets or
2. because of incapacity but has a reasonable expectation of being reengaged
in that business on their recovery
those business assets can be disregarded from the calculation of that person's
capital (1).
1 UC Regs, Sch 10, para 8
H2118 Is it reasonable to disregard for longer
The DM may decide, for example, that it is1. reasonable to disregard the assets for a longer period if the person is still ill or
disabled and can do the work when fit and able or
2. not reasonable if there is evidence, such as medical evidence, which says the
person will not be able to do the work when fit and able.
H2119 Amount to be used to purchase premises « H2045
Where a person has received an amount within the past 6 months which is to beused to purchase premises that the person intend to occupy as their home, that
amount can be disregarded from the calculation of that person's capital where it
1. is attributable to the proceeds of the sale of premises formerly occupied as
their home or
2. has been deposited with a housing association (see H2045) or
3. is a grant made to the person for the sole purpose of purchasing a home (1).
1 UC Regs, Sch 10, para 13
H2120 Is it reasonable to disregard for longer
The DM may decide it is reasonable to disregard the amount for a longer period if,for example
1. people have tried but not found premises which are suitable for their or a
member of their family's needs (in particular, if one of them is disabled and
needs a certain type of accommodation)
2. the person has found premises and the
2.1 sale has not been completed or
2.2 seller later decides not to sell.
Amount from insurance policy
H2121
An amount received from an insurance policy within the past 6 months can be disregarded where it is in connection with the loss or damage to the
1. premises occupied by the person as their home or
2. personal possessions of that person (1).
1 UC Regs, Sch 10, para 14
H2122 Is it reasonable to disregard for a longer period
The DM may decide it is reasonable to disregard the money for a longer period if for example1. the repairs will take more than 6 months
2. the replacement of personal possessions will take more than 6 months.
H2123 Amount for repairs
Where, in the past 6 months, a person has acquired a sum of money by way of aloan, grant or otherwise which is to be used for making essential repairs or
alterations to premises occupied or intended to be occupied as the person's home,
that amount can be disregarded from the calculation of that person's capital but only
where it is used for that purpose (1).
1 UC Regs, Sch 10, para 15
H2124 Is it reasonable to disregard for longer
The DM may decide it is reasonable to disregard the grant, loan or otherwise for alonger period if the repairs and alterations will take more than 6 months.