Benefit overpayment recovery guide

Question 1

Introduction

Accepted Answer

Welcome to the Benefit overpayment recovery guide.

This guide has been produced by the Department for Work and Pensions (DWP) to provide an overview to staff regarding overpayment policy. Its contents may also be shared with external advisors whose clients include those who have either received notice of a benefit overpayment, or who are repaying a benefit overpayment.

The Benefit overpayment recovery guide provides a comprehensive overview of the overpayment recovery policy that applies to overpaid Social Security benefit payments, including any associated Civil Penalties or Administrative Penalties. It is not intended however to provide a definitive statement of law and thus should not be seen to replace formal legal advice where appropriate.

The guide does not include information about the recovery of Housing Benefit and Council Tax Benefit overpayments or recoveries made under the Compensation Recovery scheme. Advice regarding these can be found on GOV.UK or are available from DWP upon request.

For information concerning the recovery of administrative overpayments that have arisen outside of the social security legislation (for example, commercial debts) do not refer to this guidance and instead refer to the HMT Guidance Managing Public Money

Policy statement

The Secretary of State has an obligation to protect public funds and to ensure that, wherever possible, overpayment and penalty debt is recovered.

Overpayment recovery is subject to various legislative limitations and safeguards.

It is DWP policy to recover all debt where it is reasonable and cost effective to do so. Debts should be recovered as quickly and cost effectively as possible without causing undue financial hardship to debtors.

Question 2

Chapter 1 - How overpayments arise

Accepted Answer

How do overpayments arise?

1.1. In simple terms an overpayment is benefit that the claimant has received but is not entitled to.

1.2. Overpayments of benefit can occur in a number of ways. In the main they are due to claimant, system or official error. They fall into 2 groups:

those where recovery is specifically provided for under Social Security legislation
those where recovery is not specifically provided for under Social Security legislation but the Secretary of State may in some cases seek recovery under Common Law principles

1.3. There are several causes for overpayments that fall under this heading:

mistake by the claimant (non-disclosure of circumstances or incomplete form)
deliberate fraud by the claimant (failing to disclose a material fact or deliberate misrepresentation)
interim and advance payments including short term benefit advance (payments ‘on account’) that could not be recovered from the benefit for which they were paid
Universal Credit Advances (treated as an overpayment for recovery purposes if the Universal Credit award ceases or does not become payable). Overpayment due to late award of other benefit / income
overpayments due to the way in which the Direct Payment banking system operates
official error – only applies to Universal Credit and contributory Jobseeker’s Allowance and Employment and Support Allowance claims (hereafter referred to as ‘New Style JSA and ESA’) made on or after 29 April 2013

1.4. All of these overpayments require an overpayment decision by a Decision Maker before recovery action is taken with the exception of recoverable hardship payments - where the decision to make payments will include the recoverability.

Mistake by the claimant

1.5. The claimant, or their representative complete their claim form incorrectly or fail to report a change in circumstances. In such instances there would be either a ‘misrepresentation’ or ‘failure to disclose’ by the claimant. Overpayments caused by the misrepresentation of, or failure to disclose, a material fact are recoverable whether the misrepresentation or failure to disclose was innocent or deliberate.

Fraud by the claimant

1.6. The claimant deliberately misrepresents their circumstances or fails to disclose material facts in order to obtain benefit to which they are not entitled. DWP only classifies an overpayment as fraud where there is either admission by the claimant after “caution”, upon conviction in court or acceptance of an Administrative Penalty.

Interim payments

1.7. An interim payment can be made where a decision maker is satisfied that there is underlying entitlement to benefit pending a final decision on the claim. These are recovered from benefit or where there is no benefit in payment will be treated as an overpayment.

Short term benefit advance - Legacy

1.8. A Short Term Benefit Advance is an advance of some or all of a claimant’s benefit (other than Universal Credit) where there is a financial need which may result in a serious risk to their health and/or welfare of the claimant or their family. These may be payable at the start of a new claim, when or after a claimant reports a change of circumstances which significantly increases the amount of benefit they may be entitled to, or where the claimant’s first benefit payment is a part week payment and insufficient to meet their immediate needs. Advances are normally recovered by making deductions from the claimant’s future benefit payments.

1.9. Overpayments only arise if there is no subsequent entitlement to benefit or if a claimant stops getting benefit before the advance is repaid. In the first of these 2 circumstances, the case is referred to a Decision Maker for a decision on the overpayment. The Advance is treated as an overpayment once the legacy claim ends. See Para 5.41 to 5.45.

Universal Credit New Claim Advance

1.10. A Universal Credit New Claim Advance can be paid where a claimant has made a new claim to Universal Credit and a decision on the claim is pending, or where there is a change in circumstances that affects the claim. They are treated as being a payment on account of benefit. A Universal Credit Advance is only paid where the claimant can show they would suffer hardship without payment. The Advance is recovered as an overpayment once the UC claim ends. See Para 5.41 to 5.45

Universal Credit Benefit Transfer Advance

1.11. A Universal Credit (Benefit Transfer) Advance can be paid where a claimant has moved from another weekly or fortnightly paid benefit onto Universal Credit which is paid monthly. A Universal Credit Advance is only paid where the claimant can show they would suffer hardship without payment. The Advance is recovered as an overpayment once the Universal Credit claim ends. See Para 5.41 to 5.45.

Universal Credit Budgeting Advance

1.12. A Universal Credit Budgeting Advance is an advance payment of Universal Credit and is treated as a payment on account. Budgeting Advances replace Social Fund payments for Universal Credit claimants and are paid to cover irregular expenses, for example a one off item or an unforeseen expense. The Advance is recovered as an overpayment once the Universal Credit claim ends. See Para 5.41 to 5.45.

Universal Credit recoverable hardship payments

1.13. This is an additional payment of Universal Credit that provides financial protection for a household where the amount of the claimant’s award is reduced because of either a sanction or a fraud loss of benefit penalty and where the claimant/couple is experiencing hardship because of the reduction.

1.14. When recoverable hardship payments cease and sanctions no longer apply to the claim, the total amount paid to the claimant or joint-claim couple is recoverable.

1.15. Recovery of hardship payments is suspended where the claimant(s) fall out of labour market conditionality because their individual or combined earnings take them above their earnings threshold.

1.16. Where the earnings of the claimant(s) means they have been out of labour market conditionality for a single period of, or periods that total, at least 6 assessment periods over a 5 year period, any remaining unrecovered balance of hardship is written off.

Overpayment due to late award of other benefit/income

1.17. A claimant can be entitled to 2 benefits for the same period, where one of the benefits is taken into account when calculating the award of the other benefit. Administrative arrangements exist to avoid a claimant being paid arrears of the benefit that has to be taken into account.

1.18. Where the process fails, legislation allows any overpayment caused by the failure to be recovered from the claimant. It also applies where any income that is taken into account when calculating the award of a benefit is paid late and we were unable to take the income into account against the benefit for the correct period.

Overpayments due to the way in which the Direct Payment banking system operates

1.19. Social Security legislation permits the recovery of overpayments that are materially due to the arrangements for payments made by Direct Payment and are system caused overpayments. These overpayments can occur either due to a system error (for example, system issues 2 payments rather than 1), or when a claimant notifies a change in their circumstances but it is too late to recall a payment that has been sent to a claimant’s bank or building society account.

1.20. Overpayments arising as a consequence of the method of payment being direct credit transfer can only be recovered from the person who received the benefit, namely the account holder(s).

Official Error

1.21. For Universal Credit, and New Style JSA and ESA, any payments made in excess of entitlement is treated as recoverable overpayments – see Para 1.39. This includes those arising from official error. For other benefits see Para 1.24 for details.

1.22. There are several causes for these types of overpayment which are detailed in Para 1.24 to 1.43. Although these overpayments are not recoverable under Social Security legislation the Secretary of State may consider recovery under Common Law principles in some cases. Common Law principles are based on legal judgments and on custom rather than statute.

Overprovision

1.23. Where the claimant has been paid more than the actual award made by the Decision Maker, an overprovision of benefit has occurred, for example 2 payments made for the same period, or the wrong amount paid although the amount awarded was correct, recovery can be considered under the common law principle of restitution, as the claimant has received money to which they are not entitled.

1.24. For Universal Credit and New Style JSA and ESA, any overprovision will be treated as an overpayment and can be recovered under Social Security Legislation.

Official Error

1.25. Official Error overpayments can be caused by an error or omission by an officer of the Department for Work and Pensions, These overpayments that fall to be determined under S71 of the Social Security Administration Act 1992, are routinely classified as Official Error, where the overpayment (or part of it) is not as a result of a failure to disclose or misrepresentation by the claimant but instead as a result of a departmental error arising under an award of benefit.

1.26. Such overpayments are not recoverable under social security legislation.

1.27. In December 2010 the Supreme Court ^{[footnote 1]} held that for any payments made as part of an award of benefit, the social security framework provided the only powers of recovery.

1.28. This means that where the official error overpayment arose under an award of benefit, it is written off. Official error overpayments arising in this scenario cannot be recovered by common law principles as the payment is made within a valid benefit award.

1.29. For Universal Credit and New Style JSA and ESA claims, any overprovision, including Official Error overpayments, can be recovered under Social Security Legislation.

Error by Third Party

1.30. This is an overpayment caused by an error or omission by a third party acting on behalf of the claimant, for example an employer.

Ex-Statutory Payments (non-prescribed payments)

1.31. The Secretary of State can make payments outside of Social Security legislation or under provisions that are not covered by Social Security legislation on recovery. Such payments are termed ex-statutory or non-prescribed. Payments included under this are, or have been:

Christmas bonus
Jobcentre Plus Allowances, for example training allowances and New Deal

1.32. Overpayments of these benefits and allowances can arise due to either claimant or DWP error. As these payments are not prescribed benefits, benefit legislation does not apply to them. Where a request for repayment is considered appropriate, it is made on the basis of common law principles. Currently DWP does not routinely recover overpaid Christmas bonuses on a value for money basis, these are treated as small overpayment limits (SMOP’s). See chapter 2.16 - 2.19.

Benefit paid before due payday

1.33. In certain circumstances it can prove helpful to pay benefit before the due payday, for example at bank holidays when payments are advanced to ensure that claimants receive their benefit on time.

1.34. Where benefit is paid (other than Universal Credit, New Style JSA or ESA) before the due date, and it comes to light (whether by notification or otherwise) that a change in the claimant’s circumstances has occurred that leads to a reduced award, there will have been an overpayment. However, this would only be recoverable under Social Security legislation if the change occurred before the advanced payment was made and the claimant had not informed DWP. If the change happened after the advanced payment was made the claimant could not have informed the DWP before the payment was made and that payment cannot therefore have been made as a result of any failure to disclose.

Direct payment made after death (DPAD)

1.35. An overpayment can occur if notification of a person’s death did not arrive in time to stop a payment going into their account. These are called direct payments after death (DPAD) and can be recovered under the Common Law of Restitution (see para 1.23).

1.36. For DPADs, initial recovery may be sought from the bank to which the payment was made or from the deceased’s representative or next of kin. This action is on the basis that the payment should not have been made, that there was no entitlement to it and the payment does not form part of the deceased’s estate.

1.37. Once an account provider (bank, building society) becomes aware that a claimant, holding a sole account, has died they would normally return any credits received after that date. Any payments credited, but not returned are classed as overpayments and are recoverable under common law.

1.38. For Universal Credit claims and New Style JSA and ESA, where a payment is made to a single person claiming benefit which should not have been paid due to the death of the claimant, the payment is classed as an overpayment and normal referral action should take place. All overpayments of Universal Credit and New Style JSA and ESA are recoverable under legislation therefore in these cases the overpayment should be referred to Debt Management for recovery.

1.39. Where the overpayment arose because:

Universal Credit - one of a couple dies, or
other benefits - partner dies and there has been a failure to disclose or misrepresentation

then an overpayment decision should be made as usual, with the overpayment being recoverable from the surviving partner.

1.40. Where a Maternity Payment, Funeral Payment, Winter Fuel Payment or Cold Weather Payment has been made which is subsequently deemed to have been overpaid due to a misrepresentation or a failure to disclose, these can be recovered under S71 of the SS Admin Act 1992. These will be classed as overpayments and are recoverable by compulsory deduction from benefit.

1.41. Official Error overpayments of Maternity Payment, Funeral Payment, Winter Fuel Payment and Cold Weather Payment are not recoverable in legislation or under common law.

1.42. Where the overpayment arose for a different reason – for example, the overpayment was due to payment made in excess of entitlement (for example £200 instead of £100), or a duplicate payment (for example 2 payments of £100 issued) , recovery can be considered under the common law principles of restitution Para 1.23 applies.

1.43. Social Fund loans remain to be recovered by compulsory deductions from benefit under the terms of the Social Fund scheme.

1.44. If a customer is in receipt of a legacy benefit, recovery of Social Fund loan debt is managed by Social Fund Recoveries Teams. If a customer is in receipt of a Welfare Reform benefit, Debt Management are responsible for the recovery.

Question 3

Chapter 2 - When and from whom do we seek recovery?

Accepted Answer

General

2.1. The Secretary of State has an obligation to protect public funds and to ensure that, wherever possible, an overpayment is recovered.

2.2. It is DWP policy to recover all debt where it is reasonable and cost effective to do so. Debts should be recovered as quickly and cost effectively as possible without causing undue financial hardship to debtors.

2.3. Overpayments fall into 2 groups:

those where recovery is specifically provided for under Social Security legislation
those where recovery is not specifically provided for under Social Security legislation but the Secretary of State may in some cases seek recovery under Common Law principles

Misrepresentation or failure to disclose

2.4. Where as a result of any person’s misrepresentation or failure to disclose a material fact, a payment of a relevant benefit has been made, the Secretary of State can recover:

any payment which would not otherwise have been made, or
the sum which the Secretary of State would have received if there had been no misrepresentation or failure to disclose

2.5. The terms misrepresentation and failure to disclose apply to both innocent errors and omissions and deliberate fraud.

What Benefit Overpayments are covered by this legislation?

2.6. Current benefits covered by this legislation can be found at Appendix 1

2.7. Other benefits (no longer able to be claimed) covered by the legislation include:

Invalidity Benefit
Sickness Benefit
Unemployment Benefit
Supplementary Benefit (including Housing Benefit Supplement and single payments)

Recoverability not dependent on misrepresentation or failure to disclose

2.8. In certain instances, legislation also allows us to recover overpaid benefit even though there was no misrepresentation or failure to disclose a material fact.

2.9. These instances include:

all overpayments of Universal Credit, New Style JSA and ESA
overpayments of Income Support, Jobseeker’s Allowance (Income Based), Employment Support Allowance (Income Related) and State Pension Credit caused by late payments of income
overpaid interim payments and Short Term Benefit Awards
some overpayments where payment was made by direct payment

2.10. In certain circumstances, and where a payment has been made outside a benefit award, under common law a person who receives money to which they are not entitled can be asked to pay it back. We ask for the money back because we have a right to recover it and a duty to protect public funds.

2.11. These overpayments are sometimes referred to as overprovisions. The underlying policy applied to this type of overpayment is that any debtor, who could reasonably be expected to have known that they have been overpaid, should be asked for repayment.

2.12. Examples of payments made outside a benefit award and where recovery is normally requested are:

the normal regular payment was £50, claimant was paid £500
a claimant receives on going payments of a benefit after they have been notified that their award of that benefit has ceased

2.13. In such cases it is likely that the claimant would have been aware that the wrong amount of benefit had been paid and so repayment is sought.

2.14. Action may be taken to recover the money through the civil courts where cost effective to do so.

2.15. Where a debtor cannot afford the suggested rate of recovery then DWP will consider negotiating a more affordable rate of recovery based on the debtor’s financial circumstances. This would be for a set period and regularly reviewed.

The Small Overpayment (SMOP) Limit

2.16. We need to ensure that it is cost-effective to recover overpaid benefit. Therefore a specific level has been identified, below which it is not considered cost effective to apply the full overpayment process. For general overpayments this level is known as the ‘SMOP limit’ and is currently set at £65.

2.17. There are some exceptions to the SMOP limit:

overpayments that have arisen due to fraud
DPAD cases. The SMOP limit of £65 does not apply to overpayments occurring due to a Direct Payment having been credited to a claimant’s account after the death of the claimant. In these cases the SMOP limit is £25. The lower amount reflects the fact that the overpayment process for these overpayments is simpler and thus cheaper
JSA/ESA Contributory or Income Based/related element (where both elements have been overpaid and one or both are £65 or under, the overpayments would be combined and where they total over £65 are recoverable)
Social Fund award overpayment
added to an overpayment covering a different period in order to raise the amount above the limit for recovery purposes

2.18. With the exception of the circumstances described in Para 2.17, as a general rule a SMOP is not either:

added to another SMOP, or
added to another overpayment in order to raise the amount above the limit for recovery purposes.

2.19. If, after an appeal or reconsideration, a recoverable overpayment is revised and reduced to below the SMOP limit (currently £65 or below), the overpayment is still recoverable. For example, if the customer had a recoverable overpayment of £85 but this is reduced to a recoverable amount of £50, Debt Management will continue to seek recovery. This is on the principle that the value for money rationale for not pursuing the SMOP no longer applies once the debt has been actioned and referred for recovery.

Who do we seek recovery from?

2.20. An overpayment is recoverable from the person who failed to disclose or misrepresented, however there are exceptions to this as below:

where it involves an overpayment of Universal Credit. An overpayment of Universal Credit is recoverable from the person to whom it was paid except where the Universal Credit claim is for a couple. In these circumstances both members of the couple are the payee and will both be jointly and severally liable for the overpayment (references to claimant below include both members of a couple in joint claim cases)
payment made to an appointee - overpayment recoverable from either the appointee and/or the claimant
payment made to a Third Party as part of the Third Party Deduction scheme (not housing costs) - overpayment is recoverable from the claimant unless an amount in excess of the amount agreed with the third party has been paid over in which case that excess is recoverable from the third party

Recovery of Universal Credit housing costs

2.21. An overpayment is usually recoverable from the person to whom it was paid, however the following exceptions apply:

payment of housing costs made direct to landlord and the overpayment is due to a change of address - overpayment is recoverable from both the claimant and/or the landlord
payment of housing costs made direct to landlord and the overpayment is a result of a misrepresentation or failure to disclose - overpayment is recoverable from person(s) who failed to disclose or misrepresented
payment of housing costs made direct to landlord and payment made in excess of rent - overpayment is recoverable from the landlord only
payment of housing costs made direct to landlord and overpayment is for a reason other than those mentioned above - overpayment is recoverable from the claimant(s) only

2.22. Overpayments that are deemed recoverable from a Landlord can be recovered from any future direct payments to that Landlord and also via the usual recovery methods (for example, deductions from benefit, Direct Earnings Attachment). This applies even if the direct payments are for different tenants. Regulations are in place to prevent the landlord placing these other tenants into rent arrears to recover the debt.

Changes to persons from whom recovery is sought

2.23. Where an overpayment is recoverable from more than one person then certain changes in those persons’ circumstances or the relationship between them may alter the action taken to recover the debt:

appointeeship ends - both the appointee and claimant remain jointly and severally liable. However, unless the appointee had committed fraud or misappropriated the money then the overpayment would be recovered from the claimant as a matter of policy
one person dies - we could seek concurrent recovery from the estate of the deceased person and from the surviving person(s) - Para 7.4
a couple separate (applies to Universal Credit debt only) - when a couple separate and they have an overpayment for which they are jointly and severally liable, the debt is apportioned 50/50 on separation. Any single penny remaining after apportionment is written off. Once this apportionment has been done we will not reverse the split liability decision. Any debt for which only one member of a couple is liable will follow that person on separation

Question 4

Chapter 3 - Calculation of overpayments and decision making

Accepted Answer

How is the overpayment calculated?

3.1. Chapter 1 outlines the circumstances in which an overpayment may arise.

3.2. In the majority of cases where an overpayment is identified, the relevant benefit award is reassessed by a Decision Maker, and the revised/superseded award details are used to calculate the amount of the overpayment.

3.3. The amount and period of the overpayment is calculated by looking at:

the period for which the claimant received the incorrect amount of benefit
the amount they were paid for that period
the amount they should have been paid for that period
any applicable offsets (as outlined in this chapter)

3.4. In simple terms the overpayment amount is the amount that the debtor has reductions been paid less the amount they should have been paid, subject to any applicable reductions.

Example

A claimant’s fortnightly Jobseeker’s Allowance was paid into his bank account from 7 April 2020 up to and including his last payday on 20 April 2020.

On 27 April 2020 the claimant notified DWP of his return to work on 13 April 2020.

The payment received from 7 April 2020 to 20 April 2020 is £148.70.

The claimant is still entitled to payment from 7 April 2020 to 12 April 2020 of £63.73.

The overpayment (£148.70 - £63.73) is from 13 April 2020 to 20 April 2020.

The overpayment is £84.97.

Third party payments

3.5. Where there are deductions from benefit for things such as fuel, the overpayment calculation is based on the gross benefit paid, including any money paid over to the third party.

3.6. In some cases reimbursement action may be taken by DWP by requesting a refund and adjusting further payments to the third party. Where such recovery action proves effective, it is treated as a repayment against the debtor’s overpayment.

Decision making – overpayment

3.7. It is DWP policy to record any recoverable overpayment decision. Some overpayment decisions can be complex and contentious therefore recording the decision and the reasoning behind it is necessary.

3.8. The overpayment decision is made by a Decision Maker. The Decision Maker will consider all the facts and evidence before applying any appropriate Social Security legislation and case law to reach a decision. An overpayment decision will normally include the following information:

whether there has been an overpayment
who or what caused it
the period of the overpayment
the amount of the overpayment
evidence of how the overpayment has been calculated
whether some or all of the overpayment can be offset, and if so how offsets have been applied
whether the overpayment is recoverable and
if so, who the overpayment is recoverable from and the basis for that determination
a decision on whether, and on whom, to apply a Civil Penalty

3.9. The claimant has the right of appeal against the amount of the overpayment (and/or a Civil Penalty), and its recoverability. Chapter 4 gives more information on appeals and disputes. For Universal Credit, as all overpayments are recoverable under legislation, only the amount of the overpayment is appealable.

Decision Making - Penalties

3.10. There are 2 types of penalty:

Civil Penalty - can be applied where:

the overpayment arose as a result of the claimant negligently making an incorrect statement, and they failed to take reasonable steps to correct the error
where the claimant failed to disclose information about their claim without a reasonable excuse
where the claimant failed to inform us of a relevant change of circumstances without a reasonable excuse

Administrative Penalty - may be offered by the fraud investigator to the person as an alternative to a prosecution in certain cases where there has been benefit fraud or attempted benefit fraud. Where a person accepts the offer of an administrative penalty, they will not be prosecuted in respect of that offence. Administrative Penalties are recovered before the associated overpayment.

3.11. Where an overpayment decision includes a decision on a Civil Penalty the liability for the penalty can sometimes be different to the liability for the overpayment - for example, where a third party acting on behalf of the claimant failed to provide accurate information the overpayment and Civil Penalty can be imposed on different people.

3.12. Where there has been a joint overpayment to a couple, and a civil penalty is appropriate, the penalty can be applied to either or both members of the couple – whoever was responsible for the failure to report. If the couple subsequently separate, the joint penalty will be treated in the same way as the overpayment and the civil penalty would be split 50/50. Where there has been a joint overpayment and an Adpen has been offered to the couple as an alternative to prosecution, there is joint and several liability. So if the couple later separate the Adpen is split 50/50. For the purposes of recovery, Civil and Administrative Penalties are treated in the same way as their associated overpayment, however arrears of benefit cannot be offset against a Civil Penalty although they can be offset against an Administrative Penalty.

3.13. For the purposes of recovery, Civil and Administrative Penalties are treated in the same way as their associated overpayment, however arrears of benefit cannot be offset against a Civil Penalty although they can be offset against an Administrative Penalty.

3.14. Where it is shown that a Universal Credit Advance has been paid in excess of what should have been paid due to a misrepresentation or a failure to disclose, an Administrative Penalty can be applied to the excess amount paid.

Offsetting

3.15. Social Security legislation allows for benefit overpayments to be reduced by benefit due under another benefit award in certain circumstances. This procedure is known as offsetting.

Types of offset

3.16. There are 3 types of offset:

offsetting prior payment against subsequent award
underlying entitlement to income related benefits
prevention of duplication of payments

Offsetting prior payment against subsequent award

3.17. This is covered by regulation 5 of the Social Security (Payments on Account, Overpayments and Recovery) Regulations 1988 and Regulation 16 of the Universal Credit Regulations (Overpayments and Recovery) 2013.

3.18. This is considered whenever an award is revised, superseded or overturned on appeal for a period for which benefit has already been paid. The regulation allows any benefit paid for the period covered by the original determination to be offset against the entitlement under the subsequent award. Such an offset, where applicable, is applied to all overpayment types.

3.19. Simply put, it means that if someone is now entitled to £50 a week for a particular period but has already been paid £40 a week for that period then the £40 a week should be treated as ‘paid on account’ of the new award. Consequently only an additional £10 a week is payable for that period under the new award.

3.20. This offset can result in a net underpayment for the whole period or a net overpayment for the whole period or indeed neither an overpayment nor an underpayment.

Here are examples of all 3 scenarios:

Example 1 - underpayment

Period under review 3 March 2020 to 30 March 2020:

The total already paid – 4 weeks at £40 – is £160.
The total now due – 4 weeks at £50 – is £200.
The offset amount is £160.
The net arrears due – £200 minus £160 – is £40.

Example 2 - overpayment

Period under review 3 March 2020 to 30 March 2020:

The total already paid – 4 weeks at £40 – is £160.
The total now due – 4 weeks at £30 – is £120 (note that this cannot exceed the amount due).
The net overpayment – £160 minus £120 – is £40.

Example 3 - no overpayment or underpayment

Period under review 3 March 2020 to 30 March 2020:

The total already paid – 4 weeks at £40 – is £160.
The total now due – 2 weeks at £30 and 2 weeks at £50 – is £160.
The offset amount is £160.
This means there is no net overpayment or underpayment.

3.21. In example 3 there is no underpayment or overpayment. It is the net result of the offset that is critical. This is not an overpayment of £20 and an underpayment of £20.

3.22. There is only an overpayment (or indeed underpayment) following offset and the net result of that offset.

3.23. This type of offset is considered in all cases. However in cases where the entitlement under the new award is nil then there is no need to formally consider the offset (which would anyway be nil).

3.24. This is covered by regulation 13 of the Social Security (Payments on Account, Overpayments and Recovery) Regulations 1988 and by regulation 8(3) of the Social Security (Overpayments and Recovery) Regulations 2013. The regulation allows a deduction from any recoverable overpayment calculated equal to any amount of additional income related benefit, which would have been paid had the correct facts been known.

3.25. There must be a valid claim to the other benefit. There can be no offset on account of a benefit that the claimant may have been entitled to (there can be no notional entitlement).

Example

Income Support and Widows Benefit are claimed on 5 January 2015. Income Support awarded at £40 a week from 5 January 2015 pending a decision on Widows Benefit. On 26 January 2015 an award of Widows Benefit is made at £54.20 a week from 5 January 2015, which exceeds the amount of Income Support payable. The Income Support ceases, and the Widows Benefit arrears are reduced by the Income Support previously paid. The arrears of Widows Benefit from 5 January 2015 to 25 January 2015 are paid at £14.20 a week.

It is later discovered that the claimant had misrepresented the material fact that her ‘husband’ had been married before and that their ‘marriage’ was invalid. The Decision Maker decides that there was no entitlement to Widows Benefit. Widows Benefit had been paid to 22 February 2015.

The Widows Benefit overpayment is:

£14.20 x 3 weeks paid 5 January 2015 to 25 January 2015 = £42.60

£54.20 x 4 weeks paid 26 January 2015 to 22 February 2015 = £216.80

£216.80 + £42.60 = £259.40

The additional Income Support of £40 a week payable 26 January 2015 to 22 February 2015, had there been no misrepresentation, is offset against the overpayment of Widows Benefit under Regulation 13:

Amount offset under Regulation 13 = £160

Net Widows Benefit overpayment (£259.40 - £160) = £99.40

3.26. The actual overpayment of Widows Benefit is £99.40 – it is not an overpayment of £259.40 with a partial recovery.

Prevention of duplication of payment (PODOP)

3.27. A PODOP is a recoverable overpayment. This is covered by the Social Security Administration Act 1992 section 74. Where an income related benefit has been paid, and arrears of another benefit become payable for that same period, the arrears of the other benefit can be reduced (offset) by the amount of income related benefit which would not have been paid had the payment of the other benefit been made on time.

3.28. This offset is used to prevent excess benefit being paid and does not result in an overpayment. However, if the procedure is not undertaken an overpayment would arise and this may be recoverable under Social Security Administration Act 1992 section 71.

3.29. If after taking PODOP action there is an outstanding overpayment of less than £65, this may be treated as a SMOP where it would not be cost effective to pursue recovery.

3.30. If there is also an associated recoverable overpayment (i.e. the overpayment and PODOP have a period in common (at least 1 day overlapping)) then these can be added together, and where they total more than £65 can be referred for recovery.

Example

Income Support has been paid to the claimant from 25 May 2022.

An award of Carer’s Allowance is made on 3 August 2022 and backdated to 25 May 2022.

The claimant is due arrears of Carer’s Allowance, however as Income Support has already been paid for the same period, the claim is re-assessed to take into account the claimant now receives Carer’s Allowance, and the arrears of Carer’s Allowance are reduced by the amount of Income Support already paid. This offset (PODOP) is to prevent duplication of payment of both Carer’s Allowance and Income Support.

Diminution of Capital

3.31. Diminution of capital for legacy income related benefits is covered by regulation 14 of the Social Security (Payments on Account, Overpayments and Recovery) Regulations 1988 and applies to overpayments in excess of 13 weeks that arise due to the claimant’s failure to disclose or misrepresentation of their capital assets.

3.32. Diminution of capital for Universal Credit is covered by regulation 7 of the Social Security (Overpayments and Recovery) Regulations 2013. Where the overpayment is in excess of 3 months and is as a result of an error relating to capital, regardless of whether it was due to claimant or official error, a diminution of capital calculation must be undertaken.

3.33. Where a claimant receiving an income related benefit has capital of £1 or more over the prescribed limit, their entitlement ceases from the day that the capital goes over the limit. If the claimant had been receiving benefit for a length of time and the limit had been exceeded by a small amount near the start of the claim, it would be unfair to expect the claimant to repay the whole amount of benefit paid. If the capital had been properly taken into account from the day it exceeded the limit, it would, over time, potentially have reduced to below the limit in order to provide for living expenses.

3.34. The regulations provide for the reduction of the figure of capital resources at quarterly intervals from the beginning of the period of the overpayment by the amount overpaid in the previous quarter.

Example

Claimant makes a claim to Income Support declaring neither income nor capital. The decision maker makes a decision based on the evidence provided, awarding benefit from the date of claim 6 February 2018 at £150 a week.

On 9 November 2019 it is established that the claimant had capital of £17,560 from the beginning of the claim. This is over the capital limit of £16000. A decision maker revises the award based on the new evidence and takes the capital into account from the date of the claim.

The overpayment will then be calculated using the diminution of capital principle. This will take into account the fact that had the claimant informed us about the capital then benefit would not have been paid and the capital will have reduced over time to provide for living expenses.

The calculation is made at 13 week intervals and the overpayment recovered as such:

Week	Paid	Due	Weekly overpayment	Total overpayment
1 to 13	£150	Nil	£150	£1950

In the following quarter the amount of capital taken into account for the overpayment calculation is reduced by the overpaid amount for the previous quarter, in this case £1950.

For the quarter from week 14, therefore, the overpayment calculation would be based on the claimant having capital assets of £15,610. Because this is below the capital limit, the overpayment would only be on the basis of tariff income from the capital.

Notification of the overpayment and Civil Penalty

3.35. Where a recoverable overpayment is not a SMOP then it must be notified to the person from whom it is recoverable (the current notification is called an ORG 7).

3.36. Where the overpayment is recoverable from more than one person then each of the persons from whom the overpayment is recoverable must be notified except where:

the overpayment is recoverable from the claimant and their appointee, still acting on behalf of the claimant, then a single notification can be sent to the appointee but making it clear that the overpayment is recoverable from both of them
the Civil Penalty decision in relation to the overpayment was made against an appointee a separate recoverability notification must be issued to the appointee. This is because a Civil Penalty can only be recovered from the appointee even if the claimant and appointee are jointly liable for the overpayment

Question 5

Chapter 4 - Appeals and Disputes

Accepted Answer

Overpayment decision disputed

General

4.1. Any recoverable overpayment or Civil Penalty decision made by a Decision Maker is notified to the claimant, who then has the opportunity to ask for a reconsideration or an appeal. There is no right of appeal against an Administrative Penalty as these are accepted by the claimant in place of prosecution.

Mandatory reconsideration of the overpayment decision

4.2. Where a claimant does not agree with the overpayment decision and/or any penalty that has been applied, they may request either a Written Statement of Reasons (WSOR), which is an explanation of the overpayment decision or request a mandatory reconsideration.

4.3. A mandatory reconsideration of the decision must happen before any appeal and allows DWP an opportunity to resolve disputes at an early stage by looking again at the decision along with any new evidence provided.

4.4. Any request for reconsideration should be made within one month and one day from the day following the issue of the notice of the overpayment decision. Example – overpayment decision letter issued 13 March 2020. one month is to 12 April 2020 and 1 day is to 13 April 2020. Deductions can commence from 14 April 2020.

4.5. Where the recovery of the overpayment or penalty has already started, recovery is suspended until the reconsideration has been completed. If recovery action has not yet started, no recovery is made while the reconsideration is outstanding.

4.6. For Universal Credit, and New Style ESA and JSA overpayments, recovery will not be suspended during the mandatory reconsideration process.

4.7. Where the decision is reconsidered, any subsequent decision would replace the original decision.

4.8. Where the decision has been changed the claimant has the right to request reconsideration of the revised decision. Where the decision has not been changed, the claimant has the right to appeal against the overpayment and/or penalty decision.

Mandatory reconsideration request received over one month and one day since decision or WSOR

4.9. The decision over whether or not to accept a late mandatory reconsideration request lies with the Decision Maker. If recovery of the overpayment has already commenced, recovery should continue until such time that the Decision Maker overturns the overpayment decision. At that time recovery of the overpayment should cease.

Appeal - Direct Lodgement

4.10. Where the claimant still disagrees with the overpayment decision following mandatory reconsideration, they can appeal against the decision. The claimant must make a Direct Lodgement appeal directly to HM Courts and Tribunals Service (HMCTS). They must do this within 1 calendar month of the date of the overpayment reconsideration decision.

4.11. Following receipt of the Direct Lodgement, HMCTS will contact DWP to request a response to the appeal. DWP will provide this within 28 days.

4.12. The request from HMCTS is classed as notification to DWP that the claimant has appealed, and where the recovery of the overpayment has already started, recovery is suspended until the appeal has been completed. If recovery action has not yet started, no recovery is made while the appeal is outstanding.

4.13. For Universal Credit overpayments, recovery will not be suspended during the appeal process.

Appeal received over one month since decision issued

4.14. The decision over whether or not to accept a late appeal lies with HMCTS. If recovery of the overpayment has already commenced, recovery should continue until such time that HMCTS advise DWP they have accepted an appeal and request a response to the appeal. At that time recovery of the overpayment should be suspended pending the outcome of the appeal.

4.15. For Universal Credit, and New Style ESA and JSA overpayments, recovery will not be suspended during the appeal process. This is because only the value of the overpayment can be appealed – not the decision that it is recoverable. Therefore, any appeal will only revise the amount to be repaid, and so suspending recovery until after the appeal outcome would only delay recovery. For that reason recovery is not suspended for these benefits.

Appeal heard by first-tier Tribunal

4.16. Where an appeal has been heard at first-tier Tribunal, the Tribunal may decide to uphold the original decision, uphold the appellant’s appeal or revise the decision under appeal. Either party to the appeal (DWP or claimant) has the right to dispute the Tribunal’s decision by appealing to the upper Tribunal. Civil Penalties cannot be revised; they can only be upheld or dismissed.

4.17. Any appeal to the upper Tribunal can only be on the ground of ‘error of law’. The following are examples of what is meant by ‘error of law’:

the first-tier Tribunal applied the law incorrectly
the first-tier Tribunal conducted the proceedings in breach of the proper procedures
the first-tier Tribunal failed to give adequate reasons for its decision

4.18. The first step in applying for permission to appeal is to request a statement of reasons for the Tribunal’s decision. The statement is written by the chairperson of the first-tier Tribunal that heard the appeal. The request for a statement must be made in writing within one month of the date of issue of the decision notice unless the chairperson considers that there are special circumstances, in which case up to 3 months may be given.

4.19. If having considered the statement of reasons, it is believed that the decision of the Tribunal was erroneous in law, there is a period of one month from the statement issue date in which to apply for permission to appeal to the upper Tribunal. This time limit may be extended by the first-tier Tribunal Judge by up to one year for special reasons.

4.20. An application for permission to appeal is considered by a first-tier Tribunal Judge.

4.21. If the first-tier Tribunal Judge grants permission, the appeal can proceed to the upper Tribunal. If they refuse permission, there is then the option of asking the upper Tribunal direct for permission.

4.22. Alternatively, the first-tier Tribunal Judge may decide to set aside the decision of the tribunal without the need to refer the case to the upper Tribunal. The case will then be heard by a new Tribunal.

4.23. If the appeal proceeds to the upper Tribunal, the upper Tribunal has power to set aside the first-tier Tribunal’s decision and refer the case to a new first-tier Tribunal, or to substitute its own decision for the one made by the first-tier Tribunal.

Refunds during the reconsideration/appeal process

4.24. Any recovery already made will not be refunded until the outcome of the reconsideration or appeal is known.

4.25. DWP policy is to suspend deductions upon receipt of a request for a mandatory reconsideration or an appeal (not Universal Credit or New Style ESA and JSA), however there is no legal requirement for DWP to do so. Until such time as the overpayment decision is overturned, DWP retains the legal right to continue deductions and therefore would not refund any deductions made after the reconsideration or appeal request is received.

Over-recovery following Tribunal decision

4.26. Where the decision of the tribunal replaces the original decision and is favourable to the claimant it will usually be that either the overpayment is non-recoverable or that the recoverable overpayment has reduced.

4.27. Any over-recovery made from the claimant is refundable where the new decision is that there is no recoverable overpayment or where the amount recovered exceeds the new amount of the overpayment. However, where there is another outstanding debt any over-recovery will normally be allocated to that debt.

4.28. If there has been over recovery of a Civil Penalty, then the refund should be made to the person who the penalty was imposed on. The over recovery of a Civil Penalty should not be used to recover an outstanding benefit debt without the debtor’s agreement.

Question 6

Chapter 5 - How do we recover?

Accepted Answer

General

5.1. The overriding policy is to recover overpayments and any associated penalties in the most efficient and cost effective way possible whilst ensuring that the debtor is not caused undue hardship.

5.2. Where the debtor is unable to repay by a single lump sum, the simplest and most effective means of recovery is by ongoing deductions from the debtor’s benefit.

5.3. For those who are no longer in receipt of benefit, recovery is sought via negotiation with the debtor. Where, as in most cases, the debtor is unable to repay in a single lump sum an instalment plan is negotiated.

5.4. Where a debtor is unable to repay the overpayment or penalty at the agreed rate there are a range of hardship options available including temporary suspension of recovery, reduction in recovery rate or in exceptional cases write-off of the debt.

5.5. Where a debtor has more than one overpayment these are usually recovered one at a time. Recovery on the second or any subsequent overpayment is suspended until the first overpayment has been fully recovered. An exception is where we are recovering DWP, Local Authority and/or HMRC debt from Universal Credit where recovery is concurrent.

5.6. For Universal Credit couples where there is no joint debt but where both claimants have single debts, the recovery is apportioned against each debt. This is unless one of the couple has a fraud classified debt, and where this is the case, the fraud debt is recovered first. Where a Universal Credit claim has ended and there is a joint debt still to recover, DWP will not separate the partnership unless the couple separate. This is to allow recovery from either partner to take place.

Penalties

5.7. For the purposes of recovery, Civil and Administrative Penalties are treated in the same way as their associated overpayment. Arrears of benefit cannot be offset against a Civil Penalty. Where there has been over recovery of a civil penalty it cannot be used to reduce a benefit overpayment without the debtor’s agreement.

Recovery by deduction from benefit

5.8. Social Security legislation allows for the recovery of recoverable overpayments by compulsory deductions from most benefits. For a complete list, see Appendix 1

5.9. The deduction can be made from a different benefit to the one originally overpaid, for example an Income Support overpayment can be recovered from a person’s Retirement Pension. The rate of deduction is determined by legislative rules and policy guidelines depending on the benefit in payment. Any benefit sanctions applied to the debtor may affect the overpayment recovery rate. Deductions may also be taken from a partner’s benefit in certain circumstances.

5.10. Deductions may also be made with the debtor’s agreement (voluntary deductions) in cases where compulsory deductions cannot be taken, for example, for Common Law overpayments.

5.11. With the exception of Universal Credit and New Style JSA and ESA, when making deductions from benefit, the benefit entitlement cannot be reduced to less than 10p in any given benefit week. For Universal Credit and New Style JSA and ESA the deductions cannot reduce the benefit entitlement to less than 1p in any given assessment period.

5.12. The weekly standard and higher rates of deduction from Income Support, State Pension Credit, Jobseeker’s Allowance (Income Based), Employment Support Allowance (income related) for overpayment recovery are prescribed in legislation. Additionally, a special rate which is set by policy, applies for cases where Social Fund deductions are also in place.

5.13. The standard rate of deduction for overpayment recovery for all of these benefits at April 2024 is £13.65pw.

5.14. The higher deduction rate is appropriate where the overpayment has arisen due to fraud and the debtor has either been convicted, has admitted the offence under caution or has accepted an Administrative Penalty.

5.15. The higher deduction rate at April 2024 is £36.40pw.

5.16. The amount of the overpayment deduction can be increased by half of the disregard applied to the following:

part-time earnings
charitable or voluntary payments
war pensions

5.17. For debtors in long term residential accommodation such as a nursing home the maximum rate of deduction is set, as a matter of policy, from April 2024 at £4.55pw.

Recovery from New Style JSA and ESA

5.18. The maximum amount that can be recovered from new style JSA or ESA is 40% of the age-related amount applicable to the liable person under the JSA or ESA regulations respectively.

Recovery from Universal Credit

5.19. See Appendix 2 for non-fraud overpayments where the claimant has earnings in excess of the Universal Credit disregard, this deduction is 5 times 5% of the appropriate Universal Credit standard allowance rate.

5.20. For fraud overpayments of Universal Credit recovery is 5 times 5% of the appropriate Universal Credit standard allowance.

5.21. In all other cases for Universal Credit, the deduction rate is 3 times 5% of the appropriate Universal Credit standard allowance.

5.22. For contribution-based JSA (old style JSA(C)) legislation prescribes a maximum rate of overpayment deduction.

5.23. This is set at one third of the rate of benefit but is restricted to the rate applicable to income-based JSA where that would be in payment but for the payment of contribution-based JSA.

5.24. For other contributory benefits, as a matter of policy, the maximum rate is set at one third of the rate of personal benefit (that is excluding additional allowances for partners, dependants) and applies to both fraud and non-fraud debt.

5.25. Where both an income related and a non-income related benefit are in payment to a debtor it is usual to take deductions from the income related benefit. In cases where there is insufficient income related benefit to take a full deduction, then deductions may be taken from the non-income related benefit instead.

5.26. In such cases the recovery of any overpayment or penalty should be at the appropriate income related rate.

5.27. Where a debtor is in receipt of a non-income related benefit, but would qualify for an income related benefit were this not in payment, wherever possible, a ‘better off calculation’ should be undertaken to ensure that a debtor in receipt of a non-income related benefit is no worse off (post deduction) than an income related benefit debtor (post deduction).

5.28. Where a debtor is in receipt of a non-income related benefit, but would qualify for an income related benefit were this not in payment, wherever possible, a ‘better off calculation’ is undertaken to ensure that a debtor in receipt of a non-income related benefit is no worse off (post deduction) than an income related benefit debtor (post deduction).

Example

Contribution-based ESA (ESA (C)) entitlement = £109.30.

Income related ESA (ESA (IR)) entitlement = £107.05.

As ESA (C) exceeds ESA (IR), ESA (C) is in payment. As a contributory benefit is in payment the deduction rate that normally applies is a third of the personal allowance rate: £74.35 divided by 3 = £24.78.

Applying this deduction rate would result in £84.52 of ESA being paid. (£109.30 - £24.78 = £84.52).

Better off calculation – if ESA (IR) were in payment the deduction rate would be £11.25. Applying this deduction rate would result in £95.80 of ESA (IR) being paid (£107.05 - £11.25).

After undertaking the better off calculation the deduction rate would be £109.30 - £95.80 = £13.50 – the difference between the higher rate of benefit in payment, and the amount of income related benefit that would be in payment with the deduction (£11.25 + £2.25 = £13.50).

Example

ESA (C) entitlement = £109.30.

ESA (IR) entitlement = £ 77.65.

As ESA (C) exceeds ESA (IR), ESA (C) is in payment. As a contributory benefit is in payment the deduction rate that normally applies is a third of the personal allowance rate which would be £24.36 (£73.10 divided by 3 = £24.36). Applying this deduction rate would result in £84.94 of JSA being paid.

Better off calculation - If ESA (IR) were in payment the deduction rate would be £11.10. Applying this deduction rate would result in £66.55 of ESA (IR) being paid (£77.65 - £11.10).

Applying the better off calculation would result in a deduction rate of £109.30.

Impact of other deductions

5.29. Deductions can also be taken from income related benefits for a number of other things such as recovery of utility arrears. Where there are other deductions in place the overpayment deduction may have to be reduced.

5.30. Where a Legacy deduction is made for on-going charges and arrears, the overpayment deduction is reduced by the amount of the arrears component (from April 2023 £4.25). See Appendix 3 . This applies to the following deductions:

housing costs
rent, and service charges
fuel costs
water charges
Council Tax

5.31. Where a Legacy deduction is made for other on-going payments, the overpayment deduction is reduced by the amount of the full deduction. This applies to the following deductions:

Child Support maintenance (before 3 March 2003)
court fines
Integrated Loan Scheme

5.32. Where there is more than one of the deductions as listed above, the overpayment deduction is reduced by the amount of each deduction.

5.33. Where a Legacy deduction is made for the following, the deduction rate is not reduced:

Community Charge
Child Support Maintenance (after 3 March 2003)
mortgage interest

Low rates of benefit

5.34. Where possible deductions should be taken from the income related benefit (for example, Income Support) in line with the legislative rules on the maximum rate of deduction.

5.35. Where there is insufficient income related benefit for that rate of deduction to be taken then a deduction should be taken from any non-income related benefit that may be in payment.

5.36. Where the recovery is from a non-income related benefit (for example, Carer’s Allowance), but an income related benefit is also in payment, (for example, low rate of Income Support), then the deduction rate should equal that which would have been taken had there been sufficient income related benefit in payment to take the deduction. We would recover at the income related deduction rate even if this was more than one third of the non-income related benefit in payment.

5.37. Where the contributory benefit is old style JSA(C) then the deduction rate should equal that which would have been taken had there been sufficient income related benefit in payment to take the deduction, unless that exceeded a third of the JSA(C) in which case the deduction would be restricted to one third. This is because the one third maximum is prescribed in legislation for contributory JSA (old style).

5.38. Where there is insufficient benefit or no other benefit in payment that will allow us to make a deduction we can consider seeking a Direct Debit agreement from the debtor. Where, the debtor is in employment, and fails to set up a suitable repayment plan, we can consider issuing a Direct Earnings Attachment (DEA) - ensuring that the recovery rate does not exceed the applicable deduction rate that would have been taken had there been sufficient benefit in payment to do so.

Example

A claimant is in receipt of Carer’s Allowance of £67.25 and Income Support of £11 per week. The claimant has a fraud overpayment therefore recovery would be taken at 40% (£30.00). There is insufficient Income Support to take the deduction, therefore deductions should commence from Carer’s Allowance at £30.

Example

Claimant is in receipt of Carer’s Allowance of £67.25 and Income Support of £11 per week. Claimant has a recoverable non fraud overpayment therefore recovery would be taken at 15% (£11.25). There is insufficient Income Support to take the deduction therefore deductions should commence from Carer’s Allowance at £11.25.

5.39. There is a different recovery rate for cases where repayment of a Social Fund loan is on-going, which is applied when Social Fund deductions are already in place at the time the overpayment recovery commences. Appendix 2 gives a table of deductions appropriate where there are Social Fund deductions.

5.40. There are also 2 overriding limits for deductions. These are that:

benefit cannot be reduced so as to leave less than 10p a week in payment (1p in the assessment period for Universal Credit)
total deductions, excluding housing costs, fines, certain child maintenance or council tax arrears should not exceed 25% of the applicable amount of the income related benefit without debtor consent. This is unless the overpayment being recovered has been classified as arising through fraud. For this purpose, the applicable amount includes any award of Child Tax Credit and Child Benefit as well as the awarded benefit. Where recovery is for fraud classified debt this percentage increases from 25% to 40%. For Universal Credit from April 2021 this is restricted to 25%

Repayment of Benefit Advances

5.41. A Short Term Benefit Advance (STBA) is usually repayable within 12 weeks and the repayment rate and repayment timescale are agreed with the claimant before the advance is paid.

5.42. Universal Credit Advances are recovered via deductions from the Universal Credit claim and the Advance must usually be paid back within:

24 months - if applied for on or after 12 April 2021 due to a new claim for Universal Credit
12 months if applied for before 12 April 2021 due to a new claim for Universal Credit
6 months if the advance applies because of a change of circumstances
12 months if it’s a Budgeting Advance

5.43. A debtor can ask for their repayments to be delayed for up to 3 months if they cannot afford them. This is only allowed in exceptional circumstances.

5.44. Where any of the advances above are not recovered from the associated benefit claim because the claim ends or is not put into payment for some reason, the outstanding balance is treated as if it were an overpayment and falls to be recovered under Section 71ZG of the Social Security Admin Act 1992. Any outstanding balance is then recovered as if it were an overpayment and recovered at the standard overpayment rate. Where an advance was paid and there was no entitlement to the associated benefit then the Advance will be classed as an overpayment under Section 71ZB of the Social Security Administration Act 1992.

Universal Credit Recoverable Hardship Payments

5.45. Recovery is suspended if the claimant and/or partner start work and their total income is equal to or exceeds their applicable threshold. The suspension will continue while the claimant’s and/or partner’s income meets or exceeds their applicable threshold. If their total income falls below their applicable threshold, the hardship payment becomes recoverable.

5.46. A Recoverable Hardship Payment is written off once the claimant and/or their partner’s total income has met or exceeded their applicable threshold for a total of 26 weeks. This does not need to be 26 continuous weeks. Any recovery already made against the Hardship Payment prior to the claimant meeting write off rules will not be refunded to the claimant. See Paragraph 1.13 to 1.1.

5.47. Where a Recoverable Hardship Payment is not recovered from the Universal Credit claim because the claim ends, the outstanding balance is treated as if it were an overpayment and falls to be recovered under Section 71 of the Social Security Admin Act 1992. Any outstanding balance is then recovered as if it were an overpayment and recovered at the standard overpayment rate.

Recovery from Arrears

5.48. Where a debtor with an outstanding overpayment is due arrears of benefit, these arrears can be withheld in full to recover an overpayment or Administrative Penalty unless those arrears arose as a consequence of a benefit award being suspended. Reg 102 of the Housing Benefit Regulations 2006 also allow for arrears to be used for the recovery of a HB overpayment.

5.49. We do not routinely use arrears of benefit to recover a Social Fund loan, because the debtor has made an agreement to repay their loan in a certain way. The only exception to this would be where arrears arose as a result of over-recovery of another Social Fund loan. If the arrears are due for this reason we will use them to recover another outstanding loan.

5.50 . Additionally, as a matter of policy arrears are not withheld if the following circumstances apply:

The arrears are for full periods’ benefit that have not been paid on time (this is regardless of whether the arrears are due from the start, middle or end of claim) and the customer is not deceased;
The arrears are for a specific reason and are earmarked for a specific purchase or expenditure. This scenario normally only occurs with recipients of income related benefits in relation to such things childcare costs, or where they are for Universal Credit Housing Costs
Where a payment is made at a ‘safe rate’ which excludes a particular component of the claim pending verification (for example, verification of housing costs/rent, ; then once that component has been verified we would not withhold those arrears against outstanding debts

5.51. Where the arrears are due for a benefit paid to one member of a couple only (for example, PIP), then those arrears will only be used to recover any joint debts or single debts owed by the claimant. If the claimant has a partner with single debts of their own, then arrears due to the claimant would only be used to recover the partner’s debts with the claimant’s permission.

5.52. Where arrears are due following a successful MR or appeal on either a single or a joint claim then arrears may be withheld to recover any debt owed by either member of the couple. Where the arrears are due following a successful MR or appeal for an individual then those arrears may be withheld to recover any debt owed by the individual or with their permission any debt owed by their partner.

5.53. Where a claimant contacts the department to request full or partial payment of their arrears, this can be considered in exceptional circumstances. This would normally be within 1 month of the claimant being notified of the arrears.

Universal Credit arrears

5.54. Where there are arrears of Universal Credit due for a joint claim, regardless of whether the joint claim is still in payment, then the arrears amount may be withheld as payment against any existing outstanding debt owed by either member of the couple.

5.55. Where both members of the couple have separate debts, the arrears will be split 50/50 and offset against each member’s debt.

5.56. Where only one member of the couple owes a debt, the full amount of the arrears due can be withheld to recover the debt.

Deduction from Partner’s Benefit

5.57. Compulsory deductions can be made from a partner’s income related benefit only if all of the following apply:

the overpayment is an overpayment of an income related benefit
they were a couple for the period of the overpayment
benefit is currently in payment to them as a couple

5.58. The rate would be determined in the same way as any other overpayment deduction from an income related benefit and normal priority rules would apply, for example recovery of the partner’s fraud debt would take priority over the claimant’s normal overpayment.

Voluntary Deductions

5.59. Where deductions from benefit cannot be taken compulsorily, for example a common law overpayment or from a partner’s benefit, deductions can only be taken with the permission of the benefit recipient.

5.60. There are no legislative limits on the rate of voluntary deductions but as a matter of policy the appropriate compulsory rate would be used as a guide.

Lump Sum Recovery

5.61. Where a debtor has sufficient funds to repay the overpayment, a lump sum payment for the full amount is expected. Where the debtor cannot make a single lump sum payment an instalment plan is negotiated.

Instalments

5.62. The rate of recovery by instalment is not governed by legislation but is determined by the debtor’s ability to repay. If the debtor is still in receipt of benefit, the appropriate rate of deduction might be useful as a guide. Ideally we look to recover overpayments within 2 years.

5.63. Each case will be different, and therefore instalment plans are set in consultation with the debtor and are based on their individual circumstances.

5.64. The preferred method of payment for instalments is by Direct Debit but other methods are available, for example:

debit card payment
bank giro credit (for example, payment slip including cash or cheque)
cheque
bank standing order
cash
e-payments

5.65. A debtor or executor cannot offer to repay part of an overpayment on the understanding the part payment represents a full and final settlement. If a debtor or executor makes a repayment on this basis, the payment will be credited to the debtor’s account and a letter issued to the debtor or executor explaining that part repayments do not clear a debt and advising the balance of the debt that remains outstanding.

Changes to persons from whom recovery is sought

5.66. Where an overpayment is recoverable from more than one person then certain changes in those persons’ circumstances or the relationship between them may alter the action taken to recover the debt.

5.67. Appointeeship ends – both the appointee and claimant remain jointly and severally liable. However, unless the appointee had committed fraud or misappropriated the money then the overpayment would be recovered from the claimant as a matter of policy.

5.68. One person dies – We could seek concurrent recovery from the estate of the deceased person and from the surviving person(s). During the bereavement run on period overpayment recovery will continue as normal and any joint debt or debt owed by either member of the couple can continue to be recovered.

5.69. A Universal Credit couple separate – when a couple separate which can be either during or after the Universal Credit claim ends, and they have an overpayment for which they are jointly and severally liable, the debt is apportioned 50/50 on separation. Any odd penny remaining after apportionment is written off. Once this apportionment has been done we will not reverse the split liability decision. Any debt for which only one member of a couple is liable will follow that person on separation.

5.70. Civil Penalties are not re-allocated to another person and will remain with the individual named in the overpayment decision.

Vulnerable Customers

5.71. Our recovery policy recognises that some of our customers can be classed as vulnerable due to their current circumstances. Vulnerability is a very subjective word and means different things to different people and there are levels of vulnerability. Vulnerability is not a constant state and people may move in and out of vulnerability. Some customers may find it difficult to cope with their debt(s) for a number of reasons, for example mental health problems or financial problems.

5.72. Our recovery policy takes account of vulnerable customers and we have a range of strategies to help with debt repayment and our recovery advisors are trained to speak to customers about what these options are and can refer them to a Money Advisor as part of the Money Advisor Network arm of DWP.

Debtor claims hardship – Repayment Negotiation Framework

5.73. A Repayment Negotiation Framework which is based on the individual circumstances of the debtor, rather than the size of the debt and repayment period, has been developed. Where a debtor or their representative contacts the recovery unit stating that the rate of recovery will cause them or their family hardship, all the evidence requested should be provided and a hardship case can be considered.

5.74. The recovery of an overpayment from any person in receipt of benefit is almost certain to cause some hardship and upset for them and their family. It is the level of hardship and upset which is taken into account when considering the application.

5.75. Where a debtor considers that recovery of the debt will cause them significant hardship, the department may consider reducing or suspending recovery. The debtor should provide reasonable evidence to support their request. Where hardship is claimed because either the debtor or a member of their family is seriously ill, it is expected that supporting evidence is provided to explain how or why the recovery of the overpayment would be detrimental to the health or welfare of the debtor or their family.

5.76. Where hardship is claimed on financial grounds, and the claimant is in receipt of a benefit, an affordability assessment will be completed to consider the household income and expenditure.

5.77. The officer making the affordability decision may request further information, and if the debtor fails to provide sufficient information the request will be unsuccessful.

5.78. Hardship will not normally be considered where the debt has been classed as arising from fraud. Where there are dependent children in the household, or where the debtor considers themselves to be in exceptional circumstances, they can request a reduction in repayment on the grounds of hardship and this will be considered. Where there are no dependent children, or where the decision maker decides there are no exceptional circumstances resulting in hardship, the maximum amount allowed by the legislation is recovered.

Hardship accepted

5.79. Where the debtor provides reasonable evidence to support their request a reduced rate of recovery is implemented. A review date will normally be set at which time the debtor’s circumstances is reviewed to determine whether hardship still applies. For example, where the hardship decision is based on a financial commitment which will only last for a known period, the reduced recovery rate should be reviewed at the end of that period.

5.80. Where hardship is accepted and repayments are reduced or suspended, the department will not refund any monies that have already been correctly recovered.

Suspension of Recovery

5.81. Where the circumstances of the debtor satisfy specific criteria (for example a benefit sanction and other higher priority deductions) recovery action can be suspended until they no longer apply.

Abandonment of recovery resulting in write off of the debt

5.82. Recovery of a debt is abandoned and the balance written off where the department has been unable to effect recovery, . A decision to abandon the debt is made when it is considered no longer cost effective to pursue the recovery of the debt.

5.83. Recovery will usually be abandoned where the debt is less than £25 and there has been no response to a request to repay.

5.84. For other debts the abandonment decision will take into consideration both the value and time elapsed since the last recovery. Where there has been no recovery for a number of years refer to Appendix 5 to consider whether the overpayment can be abandoned.

5.85. If the outstanding Social Fund debts(s) total less than £5 and no payment has been received within the previous 90 days, or if the debt(s) total more than £5 but less than £25 and all options for recovery have been exhausted, the debt(s) will be considered for abandonment. Social Fund loans of more than £25 may also be abandoned where it has been identified there is a barrier to recovery. The overall aim of the abandonment decision is to balance the cost effectiveness of continuing to maintain the loan debt against the loss of funding to the Social Fund Scheme

5.86. Barriers against recovery include:

customer deported or gone abroad
customer is in prison/similar institution
address/whereabouts not known
bankruptcy
no estate

5.87. When making a decision to abandon recovery the decision maker will consider:

action taken to date and what recovery has been achieved
amount outstanding
likelihood of benefit recommencing from which deductions can be taken, and
likelihood of a future successful referral to Debt Management to continue off benefit recovery action

Review of Recovery Rates

5.88. Unlike a loan or other such agreements, the rate of deduction or instalment is not set at a specific rate for the duration of the recovery plan.

5.89. Rates of recovery can be increased or decreased periodically to ensure efficient recovery of debt and protection of public funds.

5.90. The maximum rates of deduction are uprated, along with benefit rates, each year. However, deduction rates on existing cases do not need to be routinely increased each year as the cost outweighs the small annual increase. This excludes Universal Credit deductions which are automatically uprated each year. Where recovery by deduction runs over a number of years it is likely that deductions would be uprated every third year, however, this does not mean the recovery rate may not be amended before this time.

Compensation and Confiscation Orders

5.91. When a debtor is convicted of benefit fraud the court may award a compensation order. The order is designed to compensate DWP for the loss it has sustained as a result of the fraudulent activity and is often awarded at the same level as the amount of the overpayment. Recovery of compensation orders is undertaken by the court.

5.92. Where goods are seized from a debtor under the Proceeds of Crime Act 2002 and the offences include benefit fraud, a proportion of the confiscation order is in respect of the benefit fraud.

5.93. Whilst the court is pursuing such an order, overpayment recovery is suspended. Recovery of a Universal Credit advance should continue as normal if the associated Universal Credit claim is still in payment.

5.94. Once the order is fully repaid any balance of the overpayment is recovered. The balance is the gross amount of the overpayment less any amount recovered under the order.

5.95. There may be occasions where the order amount exceeds the associated debt. In these circumstances the policy is to use the excess amount to repay any other DWP debts the claimant may have. If there are no other debts, we would still retain the excess amount. This is on the basis that the court has awarded us the compensation and the full amount is due to DWP, even where that amount exceeds the actual recoverable overpayment amount.

Direct Earnings Attachment

5.96. Where a debtor has failed to make an arrangement to pay and is in PAYE employment, DWP can instruct a debtor’s employer to take deductions direct from their employee’s salary to recover a debt. This is known as a Direct Earnings Attachment (DEA).

5.97. For each deduction made by the employer from the debtor’s earnings, a charge of £1 can be levied against them for administration costs.

5.98. The amount of deduction is determined by the level of the debtor’s earnings. The rates for monthly pay are shown at Appendix 2 for illustrative purposes.

5.99. A Direct Earnings Attachment is only usually considered for debtors who won’t agree a voluntary repayment plan, although a debtor can request a voluntary DEA if they so choose. It is not intended for those who cannot pay where suspension, abandonment or waiver of the debt would be more appropriate.

5.100. Where we are unable to take deductions from benefit because there is insufficient benefit in payment, the amount recovered by DEA is restricted to what would have been recovered from benefit.

Referral to Private Sector

5.101. Where a debtor is not in receipt of benefit or PAYE employment, and has failed to make an arrangement to pay, we will consider referral to a private sector debt collection agency. Civil action through the courts will also be considered, where it is cost effective to do so.

5.102. Where a debt is referred to a private sector debt collection agency, they are bound by the same legislative constraints and considerations as our own collection agents.

5.103. This action is only considered with non-compliant debtors who won’t pay. It is not intended for those who cannot pay where suspension, abandonment or waiver of the debt would be more appropriate.

5.104. Where the recovery of the overpayment is under common law, civil action is only likely to be considered where the overpayment is substantial and there is strong reason to believe that the debtor should have been aware of the overpayment at the time it was made.

Tax Credit and Housing Benefit debt – recovery from Universal Credit

5.105 . When a person claims Universal Credit, any outstanding overpayments of tax credits or housing benefit may be transferred (or “migrated”) to DWP by HMRC and the appropriate local authority respectively. Where there is a combination of overpayments of Universal Credit, Tax Credit and Housing Benefit there is single deduction taken from Universal Credit but the recovery is allocated equally between the 2 or 3 debts.

Tax Credit and Housing Benefit debt – recovery from other benefits

5.106. DWP can recover overpayments of Tax Credit and Housing Benefit from other benefits. Where this is the case, normal recovery rules apply and we will only recover one debt at a time. Where there is already an overpayment deduction in place and a request is received to recover a Housing Benefit overpayment, the request will not be actioned and is returned to the sender.

Tax Credits and Housing Benefit debt – off benefit recovery

5.107. Migrated Tax Credit debt can also be recovered by DWP even though there may be no benefit in payment. The debt will be recovered as if it were a benefit overpayment and the same off benefit rules apply. Where a debtor fails to make an arrangement to repay, a DEA or referral to private sector can be considered. If a debtor is no longer in receipt of a DWP benefit, then any Housing Benefit debt is returned to the local authority to recover. Tax Credit debt is retained by DWP for recovery off benefit.

Court Costs

5.108. Costs arising from court action to seek recovery of overpayments of Universal Credit and New Style JSA and ESA, can be recovered as if they were overpayments, including via compulsory deductions from benefit or DEA.

5.109. For the purposes of recovery by deduction from benefit these should be included in the overpayment amount or if they are the only outstanding debt, referred as an overpayment.

Prescription limits for Civil Action

5.110. If a debtor refuses to pay their debt, then the Department can take enforcement action to recover the debt, including civil action to obtain a CCJ (County Court Judgement).

5.111. In England and Wales, for enforcement through the courts (civil action), there is an overriding time limit of 6 years from:

the date of the overpayment decision
the date of the overpayment notice letter, where a decision was not appropriate
any written acknowledgement of the debt by the debtor
the date of any voluntary repayment

Whichever is the later. This does not affect our ability to recover overpayments by deductions from benefit or through DEA.

5.112. A compulsory deduction or recovery from arrears of benefit will not be treated as a voluntary payment.

5.113. In Scotland, there is an overriding time limit for civil action of 20 years from the date of the overpayment decision. Where there is no decision this time limit is either:

5 years from the date of the overpayment notice
an acknowledgement of liability whichever is later

Statute of Limitations for Recovery

5.114. Other than recovery by Civil Action, for England and Wales there are no time limits for recovery of a benefit debt. While the policy is to consider abandoning some debts based on the cost effectiveness of pursuing recovery, the legal right to recover does not expire in England and Wales, and DWP retains the right to recover the debt where it is cost effective to do so.

5.115. In Scotland the debt can no longer be recovered where either it’s been:

20 years from the date of the last effective recovery,
20 years from the date of the last relevant claim (for example, any action by the Department to recover the debt) and
there has been no acknowledgement of the debt for 20 years

5.116. A debt is not extinguished after 20 years automatically. This also applies to debts arising through fraud.

5.117. A compulsory deduction or recovery from arrears of benefit is treated as a relevant claim where the recovery is not disputed by the claimant (Scotland only).

Prison

5.118. Where a claimant is in prison, overpayment recovery is suspended until release.

5.119. Where a customer has served over 6 months in prison, we would normally suspend recovery until 6 months after their release date, except for when the customer was imprisoned for a benefit offence, in which case normal recovery action should be taken on release.

Question 7

Chapter 6 – Insolvency

Accepted Answer

6.1. For the purposes of overpayment recovery, the term “insolvency” is used to cover:

bankruptcy – full legal proceedings – a creditor can petition to the court to make a debtor bankrupt, or an individual applies online for approval by an adjudicator, who then issues a bankruptcy order against the individual
Debt Relief Orders (DRO) - obtained from the Official Receiver (an officer of the court), but must be applied for through an authorised debt adviser
Administration Orders – a county court issues an Administration Order and the Order runs until all the debts are paid in full – the making of a Composition Order however means that only a proportion of each debt will be repaid and we will write off any balance at the end of the Order period
Individual Voluntary Arrangements (IVA) – the debtor’s insolvency practitioner submits the debtor’s proposal to the court, and debtor and their creditors reach a voluntary agreement to repay all debts to a given value
Sequestration (Scotland) - full legal proceedings - the Scottish equivalent of individual bankruptcy and is awarded either by the Court or by the Accountant in bankruptcy
Minimal Asset Process (MAP) (Scotland) – introduced in 2015 as a new route into bankruptcy for people with low income and minimal assets. MAP Bankruptcy is available to Scottish residents who has no assets and debts below £17,000
Protected Trust Deeds (Scotland) – a protected trust deed, overseen by the accountant in bankruptcy, is a voluntary but formal arrangement that is used where a debtor grants a trust deed in favour of the trustee which transfers their estate to the trustee for the benefit of creditors

6.2. While there are some differences in how we treat the various types of insolvency above, once DWP is informed of the insolvency regardless of whether our debt is included, it is DWP policy not to take any recovery action throughout the period. This is in recognition of the significant financial pressure on the household. This is the policy regardless of whether the debtor is repaying their debt by deductions from benefit or whether off benefit recovery is taking place. This policy excludes new debts taken out during the insolvency period and also the Debt Arrangement Scheme. See para 6.18 to 6.21 It is the debtor’s responsibility to notify DWP once they have entered into a period of insolvency.

6.3. Once the insolvency period has commenced, any deductions from benefit should cease, and any deductions made after the start date of the Insolvency would normally be refunded to the debtor. This includes any monies recovered for a fraud debt. If DWP was not informed of the Insolvency and deductions continued, DWP may only consider refunding deductions where their debt is included in the Insolvency. Where it is not included, a refund would not be appropriate because to issue a refund would increase the customers debt balance and place them back into debt with DWP.

6.4. If the debtor is due arrears of benefit during the insolvency period, it should not be withheld to recover the debt.

6.5. No payments from the debtor should be accepted within the insolvency period, but if the debtor insists on making a voluntary payment during the insolvency period it should be kept and allocated to the debt. If the debtor later requests a refund, any monies repaid would not be to the debtor, but paid to the official receiver/insolvency practitioner/administrator instead. Repayment through DEA or by Direct Debit are not classed as voluntary and can be refunded to the debtor upon request. Any payment received during an insolvency will not be used to recover any other debt that is owed regardless of whether it is included in the insolvency.

6.6. Payments that are received for any type of insolvency via an official receiver/insolvency practitioner/administrator, or by a court are legitimate payments and should not be refunded.

6.7. Where a Benefit Advance was taken out before the start of the insolvency, recovery would be suspended during the insolvency period. At the end of the insolvency period the debt would be written off unless it was classified as fraud. Where an advance is taken out during an insolvency period, recovery of that advance would not be suspended and would continue as business as usual.

Bankruptcy/Sequestration

6.8. Where the recoverable overpayment period is entirely before the start date of the bankruptcy order, or where the overpayment period spans the bankruptcy order, recovery should be suspended until after the end date of the order. This is regardless of when the overpayment decision is made, for example a decision could be made after the order date. On discharge the outstanding balance is written off unless it is a fraud overpayment, when normal recovery action should commence. Recovery of Social Fund loans or any payments due from Compensation orders could legally continue during a bankruptcy/sequestration, however it is DWP Policy to suspend recovery of Social Fund loans. Social Fund loans are not written off at the end of a bankruptcy so recovery would continue business as usual. Social Fund loans are written off at the end of a sequestration.

Example

Bankruptcy Order made on 17 June 2019. On 13 January 2020 it was realised the claimant had been overpaid Income Support for the period 14 July 200 to 11 June 2007. As the overpayment period was wholly before the date of the order, no further recovery action should be taken.

6.9. Only when the overpayment period is wholly after the date of the bankruptcy order will the overpayment not be considered as included in the order and normal recovery action could commence. However, it is policy to suspend recovery until discharge.

Debt Relief Orders (DRO)

6.10. It is the debtor’s responsibility to ensure that their DWP debt is included in the DRO. Where the recoverable overpayment is included in the DRO recovery should be suspended until after the discharge date. On discharge the outstanding balance is written off unless it is a fraud overpayment, when normal recovery action should commence. As set out in legislation, when applying for a DRO the debtor must provide all the required information. Providing inaccurate information in the application or following a request from the Official Receiver, can lead to the DRO being revoked, and in some cases to other legal proceedings.

6.11. Only debts included in the DRO will be written off on discharge. If the customer puts an incorrect amount on the DRO, we will write off the amount documented on the DRO and any money still owed will be recovered. Once a DRO has been approved you cannot in law add another debt. So if a debtor forgets to include a debt they already knew about, or only become aware of a new debt after the DRO has been set up and agreed, then regardless of the circumstances of the new debt, it cannot be added to the DRO.

6.12. Consequently if an overpayment decision is made after the DRO has been set up and agreed, then it would not be included and it would not be written off at the end of the DRO period. We would however suspend recovery of that debt until the DRO period has ended.

Administration Orders with Composition Order

6.13. Under an Administration Order, all debts should be repaid in full. However, if a Composition Order is granted, which will pay only a proportion of the debt, the balance of any debt(s) included in the order is written off at the end of the order period, including any fraud overpayment. If the court agrees, any creditors who come to light after an administration order is agreed can be added to the order however the court is unlikely to include debts that accrued after the Admin Order start date, for example a new loan or payment on account. Regardless of whether our debt is included or not, our policy is to suspend recovery until the order end date. Where our debt is included in the Admin Order then any balance outstanding at the end of the period would be written off.

Example

Admin Order made on 17 June 2017.

On 11 August 2019 it was realised the claimant had been overpaid Income Support for the period 5 March 2017 to 7 May 2017. The claimant applies to have their new debt included in the Admin Order which is granted. Overpayment is written off at the end of the Admin Order period.

Individual Voluntary Arrangement (IVA)

6.14. Any debt included in the IVA is written off at the end of the period, excluding any fraud overpayment and Social Fund Loans paid after 19 March 2012. Debts can be added to an IVA and the period of the IVA can also be extended. Regardless of whether our debt is included or not our policy is to suspend recovery during an IVA period. If our debt is not included, or is a fraud debt, then recovery would recommence once the IVA has ended.

It is the debtor’s responsibility to list all their existing debts to the trustee at the time of their IVA application. If creditors haven’t submitted their proof of debt upon being notified by the trustee to do so or after a dividend is declared, they may lose their right to share in any money being paid out as a dividend. If a creditor fails to include their debt or the incorrect amount is listed on the proof of debt statement, then any outstanding debt at the end of the IVA will be written off on discharge.

Example

IVA made on 15 April 2017 for the period 15 April 2017 to 29 December 2018. On 13 November 2018 a recoverable overpayment decision is made for the period 17 May 2011 to 13 September 2011. The claimant is notified and includes the overpayment in the IVA. The IVA is extended to 1 May 2019 at which time any outstanding debt is written off.

Minimal Asset Process (MAP) (Scotland)

6.15. The policy is to align the MAP with how we treat other forms of insolvency, and suspend recovery until the end of the MAP period regardless of whether our debt is included or not. Where our debt is included in the order, the debt (unless classified as fraud) is written off at the end of the MAP period. Where it is not included, following the end of the MAP period, recovery would recommence for any debt not included in the MAP or any outstanding fraud debt. Any Social Fund loan would be written off at the end of the MAP period.

Protected Trust Deed (Scotland)

6.16. The recoverable overpayment(s) must be included in the Protected Trust Deed and any debts not included will not be discharged at the end of the period. Recovery is suspended until discharge at which point any debt included in the Protected Trust Deed is written off unless it has been classed as fraud when normal recovery action can commence, or recommence. Unprotected Trust Deeds are not considered a form of insolvency and recovery will continue as normal.

6.17. Where a debtor did not include an eligible debt at the outset, they may be able to add it to the protected trust deed. Any deductions taken prior to the debt being added in to a protected trust deed will not be refunded.

Debt Arrangement Scheme (DAS) (Scotland)

6.18. DAS is NOT insolvency but is a statutory debt management plan administered by the Accountant in Bankruptcy. It is a voluntary debt solution and gives someone in debt much needed breathing space allowing them to repay their debts in full through a debt payment programme (DPP) over an extended period of time. When a DAS is approved all interest and charges are frozen. A debtor in a DAS isn’t discharged, they would just effectively complete the programme after the agreed term. If they don’t complete the program or fail to abide by the standard conditions of the DAS then their DAS would be revoked and all frozen interest could be reapplied to the creditors balance and they could pursue diligence to recover their debt.

6.19. The debtor makes agreed regular payments to an approved payments distributor who then makes payment to DWP Debt Management if included in the DAS. Under a DAS all debts owed would be repaid to the payments distributor. Where a DPP fully completes then a creditor will receive a percentage of their debt and any remaining balance is written off at the end of the DAS period. If a joint debt is included in the DAS then any remaining balance left at the end of the DAS period would transfer to the solvent partner.

6.20. If our debt is included in the DAS we would suspend recovery until the period ends and write off the remaining balance of the debt. If the debt is not included, we would continue with deductions throughout the DAS period.

6.21. Composition is available to a debtor in a DAS 12 years after the approval of their DPP where 70% of the total amount of debt has been repaid. If composition is accepted by creditors, then the remaining 30% of the debt is written off.

6.22. From 19 March 2012 Social Fund loans and overpayments are classed as excluded debts for the purposes of Bankruptcy, IVA, Administration Order and DRO in England and Wales. This means that the debt is not written off at the end of the insolvency period. Social Fund loans can be included in all other types of insolvency.

6.23. Regardless of whether an existing Social Fund debt is included in the insolvency or not, our policy is to suspend recovery of an existing Social Fund loan during an insolvency. If the insolvency was either a bankruptcy or a DRO then recovery would recommence at the end of the insolvency period. Recovery of any new loan taken out during an insolvency would commence immediately.

Penalties

6.24. Civil Penalties should be dealt with in the same way as recoverable overpayments, but the date of the decision is the deciding factor as to whether it is included in an insolvency or not.

6.25. If the Civil Penalty was applied after the date of the insolvency, it would not be included in the insolvency, and we would recover the Penalty regardless of whether the actual overpayment is recoverable or not i.e. any Civil Penalty applied after the start date of an insolvency is recoverable.

Example

Bankruptcy Order made on 4 November 2018. On 6 January 2019 a recoverable overpayment decision is made for the period 3 April 2018 to 15 October 2018. Decision made to also apply a Civil Penalty. As the overpayment period falls before the date of the Order, it would be written off but we would still recover the Civil Penalty.

6.26. Administrative Penalties should be treated in the same way as recoverable Fraud overpayments. An Administrative Penalty is a financial penalty which the debtor agrees to pay as an alternative to prosecution, where there is sufficient evidence to prove the debtor has been overpaid as a result of fraud. The Administrative Penalty is treated the same as a fraud overpayment and therefore will not be written off following discharge of an insolvency.

Death of Debtor

6.27. Insolvency debt is discharged on the death of a debtor and so debts are handled in the same way as if the discharge or end date had been reached.

Joint Universal Credit debt

6.28. Where there is a joint Universal Credit debt and one member of the couple become insolvent or dies then the total amount of the joint debt can be recovered from the solvent/surviving member of the couple. We can also seek to recover the joint debt from any Estate left by the deceased.

6.29. Any new benefit advance or Social Fund loan taken out during any insolvency period would not be included in the Insolvency. Recovery for those would start and continue during and throughout the insolvency period and would not be written off at the end of the insolvency period.

6.30. Recovery of a Social Fund loan that was taken out before the insolvency could continue during the insolvency period however our policy is to suspend recovery.

6.31. It is the insolvent person’s responsibility to consider whether applying for an advance or loan during their insolvency period would impact on their discharge conditions.

The Debt Respite Scheme (Breathing Space)

6.32. The Debt Respite Scheme (Breathing Space) gives someone in problem debt the right to legal protections from creditor action for a period of 60 days. During this time someone in problem debt can seek professional debt advice to help them find a sustainable debt solution.

6.33. If someone enters into Breathing Space, recovery of any overpayments included in the protections of the policy will be suspended. At the end of the Breathing Space period recovery of an overpayment can continue unless the debtor has entered a debt solution. This could be a debt relief order, an IVA or bankruptcy. If a debtor enters into a debt solution then recovery action as outlined earlier in this chapter will apply.

Question 8

Chapter 7 – Recovery from Estates (RFE)

Accepted Answer

Recovery from deceased’s estate

General

7.1. When a person dies there is a requirement for their estate to be administered in accordance with the law. The person or persons responsible for the legal administration of the estate are known as the Personal Representative(s). One of the first duties of the Personal Representative is to collect in the assets of the estate. The assets must then be used to pay the deceased’s debts. Any remaining assets should then be disposed of in accordance with the deceased’s wishes.

7.2. If the deceased was in receipt of an income related benefit prior to their death, DWP is entitled to a detailed inventory of the assets of the estate. This is to ensure that DWP was aware of all of the deceased’s capital assets during the period of their benefit claim. A comparison is made between the information provided for the benefit claim and the assets declared in the estate. If there are discrepancies between the value of the assets provided for the benefit claim and the value of the assets in the estate, or it is discovered that there are assets in the estate which were previously unknown to DWP, an overpayment is calculated based on what the claimant should have received had their assets been correctly declared. Any undeclared income identified during RFE investigations may also cause an overpayment.

7.3. Where a debtor dies with outstanding Social Security debt, DWP becomes a creditor of the estate. DWP will then make a claim for these debts from the estate. Where there is no estate the outstanding balance is written off except in the circumstances detailed in Para 7.4.

7.4. Where the debt is marked as a joint debt (applies to Universal Credit only), and one of the couple dies, the Department will seek to recover the full amount of the overpayment from the surviving partner, the deceased person’s estate, or a combination of both. This is unless the couple had separated before death in which case the overpayment for which they were jointly liable would have been equally apportioned on separation. The Department would seek to recover the debt apportioned to the deceased partner from their estate, and where there is no estate would look to write-off the outstanding balance.

7.5. Where a legal estate has been identified and the total value of the assets exceeds the minimum capital level, or the declared capital, the Personal Representative is required to provide full details of the estate. Upon receipt of the details, where it is evident there is no overpayment to calculate, the Personal Representative is notified accordingly. However, if the assets exceed the declared level/minimum capital level further investigations will be made to establish if there is an overpayment.

7.6. Where the estate’s assets do not appear to agree with those declared for benefit purposes, the benefit claim details are obtained.

7.7. A comparison will then be made between the 2. Where it is evident that all of the capital assets were known to the department or any overpayment would be below the SMOP limit no further action is taken, unless there are any outstanding debts to be claimed from the estate. The Personal Representative is notified accordingly. If it is apparent there is likely to be an overpayment in excess of the SMOP limit the Personal Representative is asked to provide further details.

7.8. Where the Personal Representative fails to, or refuses to, provide a detailed breakdown of the estate assets, DWP can use existing legislation to take the Personal Representative to the civil court. (Section 126 Social Security Administration Act 1992).

Information required from the Personal Representative

7.9. In order to substantiate a claim for benefit, the Secretary of State is entitled by legislation to request any reasonable evidence required. If it is apparent there is likely to be an overpayment in excess of the SMOP limit, the Personal Representative is required to provide financial information relating to the deceased’s assets during the period of the benefit claim. This information is required to ensure that the overpayment calculation is as accurate as possible. If the costs in obtaining this information are prohibitive or disproportionate to the size of the estate the Personal Representative, with DWP agreement, can obtain limited information.

7.10. When the Personal Representative has provided all of the information requested, DWP is in a position to establish the period of the benefit overpayment, the value of the capital assets to be used in the overpayment calculation and whether there has been any undeclared income.

7.11. There is no provision available for the Secretary of State to compensate for any expenses incurred as this information should have been provided during the period of the benefit claim.

Where Personal Representative does not provide information

7.12. Where the Personal Representative does not, or refuses to, provide a breakdown of the estate, an overpayment calculation is prepared based on the gross probate figure.

7.13. If the Personal Representative does not, or refuses to, provide information relating to the assets of the estate an overpayment can be calculated using the value of the assets at the date of death as declared in the breakdown.

7.14. An overpayment calculation based on this information is likely to lead to an inflated claim being made against the estate. Unless the Personal Representative provides the information requested the claim will stand.

Overpayment calculation

7.15. The normal benefit calculation rules apply. Chapter 3 provides details of how an overpayment is calculated.

Overpayment Recovery decision

7.16. Recovery of any overpayment is made from the Personal Representative in their capacity as Executor or Administrator of the estate. A recoverability decision will only be made when a legal estate has been identified (such as when Probate, Letters of Administration, or Letters of Confirmation in Scotland have been granted). Prior to that the estate is not a legal entity against which a recoverability decision can be made.

Who to consider for recovery action

7.17. The Secretary of State has the discretion to decide who recovery action should be taken against. DWP policy is to seek recovery from the estate. However, the Secretary of State is entitled to name anyone involved in the benefit claim where there is evidence that that person has personally benefited from the overpayment.

Disputes and reconsideration

7.18. The Personal Representative and anyone else named in the decision from whom recovery can be made has the right to dispute that decision, as if they were the claimant. All disputes will follow the normal reconsideration and appeal procedures.

Where there are insufficient funds in the estate to meet all the debts

7.19. There is a priority order to follow when the Personal Representative establishes that the estate does not contain sufficient funds to pay all creditors in full, after paying funeral and estate expenses.

7.20. If there are insufficient funds to pay all the creditors in one group in full, they are expected to pay them on a pro-rata basis. Where this is correctly applied to a DWP claim, the part payment is accepted in settlement of that claim.

Administration and distribution of the estate

7.21. There are few time limits applicable to the administration of an estate, which can take from several months to several years depending on its complexity. A claim against the estate is considered as being made on time where final distribution has not yet been made.

7.22. If the Personal Representative states that the estate has already been distributed, checks are made to establish that the estate has been administered correctly.

7.23. Where the Personal Representative has:

correctly advertised for creditors
dealt with all known expenses, debts, and creditors
waited the full 2 calendar months from the date of the advert(s) before final distribution (6 months in Scotland)

The estate will have been correctly administered, and any claims made outside of that time are too late (unless further assets come to light).

7.24. If the Personal Representative has not complied with the above (for example, did not advertise for creditors), there is no actual time limit in which to make a claim, however the Personal Representative can go to court to ask for a debt to be set aside on the grounds that they have acted reasonably.

7.25. Should enforcement action be required, the normal time limits of 6 years in England and Wales, and 5 years in Scotland will apply from the relevant date. The relevant date remains the same as the overpayment decision subject to the usual resetting rules.

7.26. Where there are multiple executors, all executors are jointly and severally liable for repayment of any overpayment. Often there is a lead executor or solicitor who DWP have been corresponding with and requests for repayment should be addressed to them in the first instance, making it clear that all executors are considered jointly and severally liable for the overpayment. If an agreement to repay is forthcoming from any executor that would be accepted on the assumption that the executors may have discussed the approach.

However, it is important to ensure that all executors are made aware of the fact that they remain jointly and severally liable and if payment subsequently breaks down they may still be approached for the remaining debt. If no offer to repay is forthcoming DWP may apportion the debt between the executors and take appropriate recovery action against each executor individually. In such cases the debt is apportioned equally between all the executors with any odd pence written off.

Late claim against the estate - where the estate has been correctly administered

7.27. When the estate has been correctly administered and distributed before the Personal Representative received DWP’s claim, the Personal Representative is notified that no further action is taken to pursue the claim against the estate.

7.28. However, should any further assets be disclosed the Personal Representative is expected to meet any outstanding claims.

Late claim against the estate - where the estate has not been correctly administered

7.29. When the Personal Representative has distributed the estate early or paid creditors/beneficiaries in the wrong order, they are personally liable for unpaid debts.

Payment of the debt by instalments

7.30. Where a personal liability exists, and the Personal Representative is unable to immediately dispose of non-liquid assets in order to repay the debt, an offer of a lump sum part-payment, plus an instalment agreement to clear the balance in a reasonable amount of time may be acceptable. When the offer is accepted, Direct Debit is the preferred method of repayment. If the Personal Representative is in receipt of benefit recovery by voluntary deduction from their benefit is considered - written agreement of the Personal Representative is required in this instance.

7.31. Where there is more than one overpayment, the recovery action to take on each debt is dependent on whether the Personal Representative is named in the decision.

7.32. If the debt is being settled by instalment DWP has the discretion to charge interest. Interest is set at 1.5% above the Bank of England base rate.

Enforcement Action

7.33. DWP may consider action if there is no satisfactory response to the final demand, or an instalment offer has broken down and no new offer is made. Careful consideration is given to the Personal Representative’s circumstances.

7.34. Action is considered as soon as it is apparent that the debtor will not pay unless they are made to do so. This will prevent enforcement being prejudiced by a long delay in the handling of a case.

7.35. Where the debtor states that assets will need to be sold in order to meet the debt, DWP will consider whether to delay enforcement pending the sale of the assets.

7.36. Where there is no estate or insufficient funds in the estate, DWP would look to write-off the outstanding balance.

When will Abandonment be considered?

7.37. The debt is abandoned by writing it off when all reasonable, and cost effective, action has been taken, and all avenues, including enforcement through the Courts have been investigated to recover the debt. See also Para 5.80 to 5.82, and Appendix 5 for further details about abandonment.

Question 9

Chapter 8 – Secretary of State discretion and waiver

Accepted Answer

8.1. The Secretary of State has a duty to protect public funds and will therefore seek to recover debt in all circumstances where it is reasonable to do so. The legislation on the recovery of debts provides the Secretary of State with discretion over whether and how to recover money that is owed. This Chapter explains how that discretion can be exercised. This discretion can be exercised by cancelling part of, or the entire debt through the process of write off or waiver. Discretion can also be exercised by varying the rate of recovery or suspending recovery.

8.2. Discretion can be considered at any point in the debt journey which could be either when an overpayment is first discovered and before it is notified to the claimant or after notification where the claimant has asked us to look at the circumstances surrounding their overpayment. In exercising this discretion the Secretary of State adheres to the principles set out in the HMT Guidance Managing Public Money (MPM) May 2021.

How the discretion is applied

8.3. There are four main ways that the Secretary of State discretion may be applied

Cost Effectiveness - Where the Secretary of State does not consider that any action to recover the debt is warranted on cost grounds for example, small overpayments (SMOP). Para 2.16 to 2.18 applies. This would result in the entire debt being written off.
Abandonment - The Secretary of State may exercise their discretion and abandon recovery of a debt where all options for recovery have been exhausted and where there is no reasonable expectation of recovery of the debt. Appendix 5 outlines the conditions that need to be met before the Secretary of State will consider abandonment. This would result in the entire debt being written off.
Waiver - Waivers are only granted in exceptional circumstances and there would need to be very specific and compelling grounds to do so. A request for waiver should normally be made in writing. This may result in all, or part of the debt being written off.
Reduction or suspension - In certain circumstances reducing the repayment or suspending recovery may be an option that would alleviate the debtor’s hardship. Whenever recovery is reduced or suspended the debtor must be made aware that this will be for a limited period only and that after that period repayments may recommence or increase. The discretion to vary the rates of recovery or to suspend recovery are detailed in Chapter 5.

Waiver

8.4. This guidance deals with the application of waiver in relation to statutory overpayments, Civil Penalties, Recoverable Hardship Payments and UC Advances.

8.5. There are a number of different reasons why the department may consider waiver – and not all need to be met for a waiver to be granted.

8.6. Factors which may be relevant to a waiver decision are:

The debtor’s financial circumstances and those of their household
Whether the recovery of the debt is impacting the debtor’s health or that of their family
DWP conduct, including statements made by DWP, and the circumstances surrounding how the overpayment arose
The debtors conduct and whether the debtor took steps to mitigate any overpayment, contact or notify DWP, whether the debtor misrepresented or failed to disclose any matter, or if there was any fraudulent conduct etc
Whether the debtor has relied on the overpayment to their detriment
Whether the Department intended the claimant to have the money – for example where the claimant was paid the wrong benefit but could have claimed a different benefit and received the same amount of money
Where the debtor can demonstrate that they did not benefit from the money that was paid
Any other factor which appears relevant to the decision maker, or which indicates recovery would not be in the public interest

8.7. This is not an exhaustive list and any factor which appears relevant in a particular case may be taken into account. It is unlikely all the above factors will be present in any individual case, and depending on the circumstances of the case, the presence of one factor alone may be sufficient to justify waiver. In most cases it would usually be expected that the recovery of the debt is causing either financial hardship or welfare issues for the debtor or their family. This will depend on the facts of the particular case and all factors which appear relevant should be considered along with the individual circumstances of the case. A request for a waiver can be made for a variety of reasons and may be a combination of factors.

8.8. Matters that fall into the category of public interest might include the Department’s reputation; public response; legal implications and risk of challenge and the current Government policies. Whether it would be in the public interest or not to recover a debt will be subjective, therefore for cases that fall into this category it will often be appropriate to involve Policy and/or Legal in the decision-making process to ensure a consistent approach.

8.9. Waiver will not be dependent upon all of the factors above being applicable but is likely to be a combination and will be dependent upon the individual circumstances of the case - depending on the circumstances of the case, the presence of one factor alone may be sufficient to justify waiver. The decision should consider all the relevant factors and any other exceptional or extenuating circumstances; however, the decision will always take into account the impact of recovery on the debtor.

Waiver suitability

8.10. A debtor does not need to be currently in receipt of benefit for a waiver to be considered, nor does a debt need to be in recovery. If there is sufficient evidence to show that the prospect of recovery is already having an adverse impact on the debtor then the debt may be considered suitable for waiver, even though recovery may not have commenced.

8.11. An outstanding mandatory reconsideration or ongoing appeal relating to the specific debt, does not prevent a waiver from being considered. Whether it is appropriate to consider waiver prior to a mandatory reconsideration or ongoing appeal being determined will depend on the circumstances.

8.12. If the debtor is the subject of an ongoing investigation or prosecution in relation to a benefit offence, then the Department will not consider a waiver on any grounds until all action has been completed so as not to prejudice or jeopardise any ongoing legal action. Debtors will be notified that the Department cannot consider a waiver at this time. Once all investigations and legal action has been completed the Department can consider the waiver request. A reduction in repayment or suspension of recovery on the grounds of hardship may still be considered, however.

8.13. A debtor may have an appointee or Power of Attorney handling their affairs. There are a number of reasons why a debtor may have an appointee or POA, but the existence of one does not in itself mean the debtor is unaffected by the overpayment. A waiver can be considered regardless of whether the debtor is aware of the debt or not. Evidence would need to be provided to show either the current impact of recovery on the debtor, or where recovery has not yet started, what impact the future recovery action will have.

Waiver process

8.14. To ensure consistency in the application of the Secretary of State discretion, responsibility to waive recovery is held centrally within the Department by a specialist team in Debt Management.

8.15. If a debtor gets in touch to discuss repayment of their debt, or mentions they are struggling to repay their debt, staff should advise them in the first instance to contact Debt Management on 0800 916 0647. Textphone 0800 916 0651. If a debtor specifically requests a waiver, they should be referred directly to Debt Management for information on the waiver process.

8.16. The address to send a Waiver request and any supporting evidence can be sent to Debt Management and should be clearly marked “Waiver Request” at:

Debt Management (C)
Mail Handling Site A
Wolverhampton
WV98 2DF

8.17. The Department should never refuse to consider a waiver request. If there is insufficient supporting evidence, additional evidence can be requested, and a decision deferred until the information is received. If the debtor fails to provide any evidence within the agreed timeframe to support their request a decision can still be made, though it is unlikely to result in waiver.

8.18. The waiver decision should take into consideration the debtors’ entire circumstances, as far as they are known, including where it is applicable, the factors as detailed at Para 8.6 Chapter 8.

8.19. The cause of the overpayment alone will generally not be sufficient reason for waiver to be granted. However, when considered in addition with the other factors, such as the debtor’s circumstances, and claims of hardship or welfare concerns, these together might provide sufficient reason for recovery not to be pursued. It may be the cumulative effect of a number of factors which makes waiver appropriate.

8.20. A waiver can be considered for individual debts, or all debts owed by the individual. For example, DWP can consider waiving a specific debt that is owed by the debtor on the basis that it would not be in the public interest to recover that particular debt.

8.21. Requests for a waiver normally come direct from the debtor or their representative. However, DWP may initiate a referral for a waiver decision, before notifying an overpayment decision, for example in cases which are particularly distressing or involve exceptional and severe ill-health, before an overpayment decision is notified. Such cases are likely to be rare.

8.22. It will only be in very exceptional circumstances that a fraudulent overpayment will be waived.

Evidence

8.23. When applying for a waiver, the debtor is responsible for providing all necessary information and evidence to explain and support their application. This may include information regarding the debt itself, as well as detailing the personal circumstances of the debtor.

8.24. The evidence provided by the debtor or their representative is normally accepted in good faith, unless information or local knowledge is held which puts it in doubt.

8.25. It is for the decision maker to assess what evidence is needed in any particular case. If the decision maker considers they are missing any relevant information they should request the debtor provide it before making a decision. If the debtor does not provide the requested evidence within the agreed timeframe the decision maker will make a decision based on the available evidence.

Financial Hardship

8.26. The recovery of any debt from someone in receipt of an income related benefit is likely to cause some degree of hardship. Where the debtor advises they cannot afford to repay their debt, the decision should take into account whether significant financial hardship is likely to result if recovery is pursued. Whether such hardship is sufficient to justify waiver will depend on all the circumstances of the case and any other relevant factors.

8.27. Where waiver is requested on financial grounds, the financial problems would need to be over an extended period of time with no sign of change. If the financial position is likely to change in the foreseeable future then suspension of recovery may be more appropriate than waiver.

8.28. It is for the Decision Maker to consider what evidence is needed in any particular case. For applications based on financial hardship, full details of the debtor’s financial position will usually be required. Normally this would include but is not limited to:

a full list of all debts and steps taken to manage the debt with those creditors
full details of the income and expenditure of the debtor, and where applicable their family, and any other members of the household
bank statements for the past 6 months and
any other relevant information for example, job offers etc

8.29. If the debtor has other debts in addition to their debt to DWP, then their overall debt position needs to be considered. The debtor would need to provide evidence that they have sought solutions with all their creditors – not just DWP. Suspension or a reduction in repayment may be appropriate while the debtor seeks resolution of their debts with other creditors.

8.30. There are also other debt solutions that in some situations may be more appropriate for the debtor other than waiver (for example Breathing Space, bankruptcy, Debt Relief Order (DRO) etc.) See Chapter 6.

Welfare and/or ill health

8.31. It is not always necessary for the applicant for a waiver to supply evidence that directly links the recovery of the debt to the debtor’s health or that of their family. Where it is clear from all the available evidence that recovery will or is having an excessive negative impact on the health and wellbeing of the debtor or their family, that maybe sufficient to grant a waiver.

8.32. What evidence is required will depend on the circumstances of any particular case and decision makers should use their discretion. Where hardship is claimed on health grounds, it will normally be appropriate for the debtor to supply evidence showing that recovery of the overpayment is or would be detrimental to the health and/or welfare of the debtor or their family.

8.33. Note that the evidence:

should not simply be a list of any medical conditions
should demonstrate how recovery of the debt is impacting on the health or welfare of the debtor or their family
should usually be in the form of a letter from a medical professional for example, a GP, consultant, psychiatric nurse but this will not always be necessary. Often a social worker or welfare adviser may have a clear understanding of the impact that recovery would have on the debtor.
if the debtor says that their ill health is being exacerbated or caused by financial hardship, then evidence of their financial position should also be provided as specified above for full details of income and expenditure.

8.34. It is expected that the debtor will make anyone offering an opinion on the impact of debt recovery on their health aware of the full circumstances of their financial situation including if they have multiple debts.

8.35. Care should always be taken in managing expectations so that debtors are not led to believe that their request for waiver will be approved on the production of a letter from their GP supporting their request. Waivers for this reason are only granted in exceptional circumstances and only where it can be shown that continued recovery of their debt will contribute towards the deterioration of the debtors or their families’ health.

8.36. A debt may be waived where it can be demonstrated that by the waiving the debt a debtors health will improve. If the debtor has debts with other creditors, then even by waiving our debt the health and welfare issues being experienced by the debtor will likely not be alleviated. A different solution other than waiver of the debt may be required in these circumstances, for example a repayment plan involving all creditors.

8.37. Financial/domestic abuse - There will be occasions when a waiver is requested that relates to a joint claim, where the partner applies on the grounds that it would be unfair to expect them to repay their share of the debt (for example domestic or financial abuse cases). Where this occurs, the Department can consider a waiver for the partner’s portion of the debt balance where it is shown that they did not benefit from the money that was paid. This can be considered regardless of whether the partner is still in the abusive relationship. A waiver would not however be granted purely on the basis that the debtor is a victim of abuse.

8.38. The Department intended the debtor to have the money - A waiver may be considered where although there was an overpayment of a particular benefit, when the situation is looked at more broadly, there was actually no real loss to the public purse. This might be in cases where the debtor was overpaid one benefit but in fact could have claimed and would have been entitled to another benefit.

8.39. For example, where the department failed to issue a decision notification, and the debtor continued to be paid the wrong benefit, meaning they missed the opportunity to claim another benefit which they might have been entitled to. This will only apply in cases where the debtor could not reasonably have been expected to know they were being overpaid

8.40. Terminal Illness and Self Harm - The Department recognises that repayment of a debt can be upsetting and stressful for the individual, which is why there are several repayment negotiation options available. The Department will always work with the debtor to agree an affordable and sustainable method of repayment which does not place undue burden on them.

8.41. The Department also recognises the upset caused by a terminal diagnosis. However, this does not automatically mean that a debtor cannot afford to repay their debt or that their welfare would be significantly improved by waiver of the debt. Terminal illness or threats of self-harm are not, of themselves, sufficient grounds for waiver of a debt, but when considered with other factors may mean a waiver can be granted.

8.42. Care should be taken when dealing with requests for waiver from those who are terminally ill or who have a terminally ill dependant (including those receiving DLA under special rules). These cases need to be handled sympathetically, with the approach and correspondence being sensitive and specific to the individual. Attention needs to be paid to ensure that any contact with the debtor does not lead them to believe their debt will automatically be waived.

8.43. The approach to be taken will depend on whether it is the debtor or one of their dependants who is terminally ill and whether there may be any assets that could be available to repay the debt. However, the general approach should continue to be whether recovery of the overpayment in question would be detrimental to the health or welfare of the individual or their family.

8.44. If the waiver decision maker can confirm the debtor’s (or that of their dependants) medical condition without contacting the debtor, they should do so. Where this is not possible the debtor will be asked to provide sufficient evidence.

8.45. Where a debtor is already deceased, a waiver will usually not be appropriate. Any debts would be recoverable from any estate left by the deceased.

8.46. When a waiver referral is received, the decision maker should consider whether the debtor is vulnerable and if further support is needed.

8.47. If the evidence submitted in support of the waiver states that the debtor has either attempted to self-harm, or intimated an intention to self-harm, the case should be referred to a senior manager for a decision. The senior manager will take into consideration all the evidence provided and decide whether a waiver is appropriate and take the necessary steps to arrange for the decision to be communicated to the individual. This may involve a telephone conversation or home visit to support the debtor.

Action following a request for waiver

8.48. It is the debtor’s responsibility to provide sufficient information to support their request. Before a decision can be made the debtor may be asked to provide more information.

8.49. Recovery of a debt will usually continue whilst a waiver request is being considered and a response to the request would be sent to the debtor and or their representative. If a waiver is granted recovery of the debt would cease from the date of the waiver decision. The department will only waive recovery of the balance of the overpayment outstanding at the time the decision is made. No refund of any monies already correctly recovered would usually be given unless there are exceptional and compelling reasons to do so.

8.50. Where it has been decided that the conditions for waiver have not been met, the Decision Maker will consider whether a reduction in repayment or a suspension of recovery is appropriate. This may result in a reduced repayment or a suspension of recovery for an agreed period.

Debtor does not agree with the decision

8.51. There is no right of appeal against a decision not to apply discretion, or where the debtor disagrees with the discretion that has been applied. If the debtor disagrees with the decision, they may contact the Department to request a more detailed explanation of the decision, or request that the decision is looked at again by a different decision maker if they are able to provide more evidence.

8.52. If the debtor still does not agree with the decision, they may contact the Customer Experience Team who will consider any information or complaint from the debtor and ensure that DWP Policies have been correctly applied and look to address any outstanding issues or concerns.

Question 10

Appendices

Accepted Answer

Appendix 1 - Prescribed social security benefits/payments:

DWP benefits that we can recover overpayments of under social security legislation and that we can take compulsory deductions from:

Attendance Allowance
Bereavement Support Payment (overpayments of BSP only)
Carer’s Allowance
Disability Living Allowance (DLA)
Employment and Support Allowance (ESA)
Incapacity Benefit
Income Support
Industrial Death Benefit
Industrial Injuries Disablement Benefit
Jobseeker’s Allowance (JSA)
Maternity Allowance
New State Pension
New style Jobseeker’s Allowance*
New style ESA**
Pension Credit
Personal Independence Payment (PIP)
Pneumoconiosis, Byssinosis and Miscellaneous Disease Benefit
Reduced Earnings Allowance
Retirement Pension
Severe Disablement Allowance
State Pension
Universal Credit
Widows Benefit
Widowed Mothers Allowance
Workers Compensation (Supplementation) Benefit

Limited prescription

Overpayments that can be recovered from the Prescribed list, but we cannot take compulsory deductions from them to recover a DWP overpayment.

Back To Work Bonus (treated as the qualifying benefit)
Council Tax Benefit (pre April 2013)
Housing Benefit
Social Fund Payments
Winter Fuel Payments
War Pension

Prescribed recovery

These can be recovered in the same way as prescribed benefits but as they are not payments themselves, no recovery can be made from them.

Administrative Penalty
Civil Penalty

Payments not prescribed

Overpayments of these are not recoverable under social security legislation and we cannot take deductions from any payments of these.

Training Allowance
Widow’s lump sum payment
Disablement Gratuity
Christmas bonus
Tax Credits (Can be recovered from Social Security benefits)
New Deal
Bereavement Benefit lump sum payment
Universal Credit Recoverable Hardship Payments (any outstanding balance outstanding once the Universal Credit claim has closed can be recovered as if it were an overpayment)
Council Tax Reduction Schemes

*/** for claims made on or after 29 April 2013 in a relevant district and by a Pathfinder group.

Appendix 2 - Rate of deduction for overpayment recovery

Although a customer’s repayment rate is set in legislation, DWP may not always recover at that rate, for example, at 5%, 15%, 25% and 40%.

This is because other higher priority deductions such as third-party deductions, reduce the percentage of standard allowance that can be recovered from. Where this happens DWP will recover the maximum amount possible to recover the debt unless a lower payment rate has been agreed with the customer. DWP will not exceed the maximum applicable deduction.

The standard and higher rates of deduction from income related benefit for overpayment recovery are prescribed in legislation. There is an administrative lower rate that has been introduced for use where directed, for example claimants in residential care home.

Additionally, a different rate has been agreed for cases where Social Fund deductions are in place.

Further provisions exist for increasing a deduction rate where the household has income that is disregarded in the benefit assessment, for example partner’s income is disregarded.

Standard deduction rate

The standard deduction rate is calculated at 3 x 5% of the personal allowance for a single claimant aged not less that 25. Where the 5% is not a multiple of 5p, it is rounded up to the next higher such multiple.

Example

Income Support 25 year old personal allowance rate from April 2023 is £84.80

5% of £84.80 = £4.24

Rounded up to the nearest multiple of 5p = £4.25

3 x £4.25 = £12.75

Higher deduction rate

From April 2015, where the debt is as a result of fraud, the deduction is calculated at 8 x 5% of the personal allowance for a single claimant aged not less than 25 years. Where this is not a multiple of 5p, it is rounded to the nearest such multiple.

Example

Income Support 25 year old personal allowance rate from April 2023 is £84.80.

5% of £84.80 = £4.24

Then rounded up to the nearest multiple of 5p = £4.25

8 x £4.25 = £34.00

Lower Deduction Rate

The lower deduction rate is calculated as one third of the standard rate, using the above example = £4.25.

Table of Deduction rates for; Income Support, JSA (Income Based), ESA (Income Related), Pension Credit and Housing Benefit:

From	Standard rate 15% (non fraud debt)	Maximum rate 40% (fraud classified debt)	Lower rate 5% (nursing homes)
April 1999	£7.80	£10.40	£2.60
April 2000	£7.95	£10.40	£2.65
April 2001	£8.10	£10.80	£2.70
April 2002	£8.10	£10.80	£2.70
April 2003	£8.25	£10.80	£2.75
April 2004	£8.40	£11.20	£2.80
April 2005	£8.55	£11.20	£2.85
April 2006	£8.70	£11.60	£2.90
April 2007	£9.00	£12.00	£3.00
April 2008	£9.15	£12.00	£3.05
April 2009	£9.75	£12.80	£3.25
April 2010	£9.90	£13.20	£3.30
April 2011	£10.20	£13.60	£3.40
April 2012	£10.65	£17.75	£3.55
April 2013	£10.80	£18.00	£3.60
April 2014	£10.95	£18.25	£3.65

From	Standard rate 15% (non fraud debt)	Maximum rate 40% (fraud classified debt)	Lower rate 5% (nursing homes)
April 2015	£11.10	£29.60	£3.70
April 2016	£11.10	£29.60	£3.70
April 2017	£11.10	£29.60	£3.70
April 2018	£11.10	£29.60	£3.70
April 2019	£11.10	£29.60	£3.70
April 2020	£11.25	£30.00	£3.75
April 2021	£11.25	£30.00	£3.75
April 2022	£11.55	£30.80	£3.85
April 2023	£12.75	£34.00	£4.25
April 2024	£13.65	£36.40	£4.55

There is a different rate for cases where repayment of a Social Fund loan is on going which is applied when Social Fund deductions are already in place at the time the overpayment recovery commences. In these cases, deductions should be set at the lower of the standard rate applicable to the case (taking into account other deductions) or the rate in the table below (based on the level of Social Fund repayment).

The rates are reviewed every year in line with changes to benefit rates but any amendment to the rate of recovery is made only where it is considered appropriate.

From April 2023 these rates are:

SF loan repayment rate	Maximum standard overpayment deduction rate	Maximum higher overpayment deduction rate
5 - 9%	£8.75	£19.60
10 - 11%	£7.30	£18.35
12 - 14%	£5.65	£15.30
15% and over	£4.25	£13.10
Less than 5% (where rescheduled loan or lower deduction rate in place)	£2.65	£10.90

Uprating of deductions

The maximum rates of deduction are uprated, along with benefit rates, each year. However, deduction rates on existing cases do not need to be routinely increased each year as the cost outweighs the small annual increase. This excludes Universal Credit deductions which are automatically uprated each year. Where recovery by deduction runs over a number of years it is likely that deductions would be uprated every third year, however, this does not mean the recovery rate may not be amended before this time.

Disregarded Income

Where the debtor has partially disregarded income such as certain benefits or part time-earnings, legislation allows DWP to increase the deduction rate for recovering an overpayment by an amount equal to half of the applicable disregard. Wholly disregarded benefits such as Attendance Allowance and Disability Living Allowance are not included within this provision.

Where the disregard is applicable to part-time earnings and the debtor claims hardship DWP will take into consideration any work-related expenses such as fares and child minding. DWP strives to ensure in such instances that the wider government agenda on welfare to work is not undermined by effectively making someone who is working worse off, in terms of overall income than if they were not working and in receipt of benefits.

Example

Debtor receives JSA(IB) of £58.90 per week and they have part-time earnings of £20 per week. The earnings attract a £10 weekly disregard.

The deduction rate should be: £11.25 (which in this case is the standard 15% deduction rate) plus half the disregard (£5.00).

The total rate of deductions should be £16.25.

Where the earnings are less than the disregarded income, we would increase recovery by half of the earnings amount.

Example

Debtor receives Income Support (IS) of £157.45 per week and they have part-time earnings of £15 per week. The earnings attract a £20 weekly disregard.

The deduction rate should be: £11.25 (which in this case is the standard 15% deduction rate) plus half the earnings (£7.50) because the earnings of £15 are less than the disregard of £20.

The total rate of deductions should be £18.75.

Table deduction rates for Universal Credit

From April 2017	Standard rate 15% (non fraud debt)	Higher rate 25% (earnings and Universal Credit)	Maximum rate 40% (fraud classified debt)	Lower rate 5% (nursing homes)
Single under 25	£37.77	£62.94	£100.71	£12.59
Single 25 and over	£47.67	£79.46	£127.13	£15.89
Couple both under 25	£59.28	£98.80	£158.08	£19.76
Couple one or both 25 and over	£74.83	£124.72	£199.56	£ 24.95

From October 2019	Standard rate 15% (non fraud debt)	Higher rate 25% (earnings and Universal Credit)	Maximum rate 30% (fraud classified debt)	Lower rate 5% (nursing homes)
Single under 25	£37.77	£62.94	£75.53	£12.59
Single 25 and over	£47.67	£79.46	£95.35	£15.89
Couple both under 25	£59.28	£98.80	£118.56	£19.76
Couple one or both 25 and over	£74.83	£124.72	£149.67	£24.95

From April 2020	Standard rate 15% (non fraud debt)	Higher rate 25% (earnings and Universal Credit)	Maximum rate 30% (fraud classified debt)	Lower rate 5% (nursing homes)
Single under 25	£51.41	£85.68	£102.82	£17.14
Single 25 and over	£61.48	£102.47	£122.97	£20.50
Couple both under 25	£73.29	£122.15	£146.58	£24.43
Couple one or both 25 and over	£89.11	£148.51	£178.21	£29.70

From April 2021 to September 2021	Standard Rate 15% (non fraud debt)	Higher Rate 25% (earnings and Universal Credit and fraud)	Lower Rate 5% (nursing homes)
Single under 25	£51.60	£86.00	£17.60
Single 25 and over	£61.73	£102.88	£20.58
Couple both under 25	£73.59	£122.65	£24.53
Couple one or both 25 and over	£89.49	£149.15	£29.83

From October 2021	Standard Rate 15% (non fraud debt)	Higher Rate 25% (earnings and Universal Credit and fraud)	Lower Rate 5% (nursing homes)
Single under 25	£38.60	£64.33	£12.87
Single 25 and over	£48.73	£81.21	£16.24
Couple both under 25	£60.59	£100.98	£20.20
Couple one or both 25 and over	£76.49	£127.48	£25.50

From April 2022	Standard Rate 15% (non fraud debt)	Higher Rate 25% (earnings and Universal Credit and fraud)	Lower Rate 5% (nursing homes)
Single under 25	£39.80	£66.33	£13.27
Single 25 and over	£50.24	£83.73	£16.75
Couple both under 25	£62.47	£104.11	£20.82
Couple one or both 25 and over	£78.86	£131.43	£26.29

From April 2023	Standard Rate 15% (non fraud debt)	Higher Rate 25% (earnings and Universal Credit and fraud)	Lower Rate 5% (nursing homes)
Single under 25	£43.82	£73.03	£14.61
Single 25 and over	£55.31	£92.19	£18.44
Couple both under 25	£68.78	£114.63	£22.93
Couple one or both 25 and over	£86.82	£144.71	£28.94

From April 2024	Standard Rate 15% £ (Non-Fraud Debt)	Higher Rate 25% £ (Earnings and UC and Fraud)	Lower Rate 5% £ (Nursing Homes)
Single under 25	46.75	77.92	15.58
Single 25 and over	59.02	98.36	19.67
Couple both under 25	73.38	122.31	24.46
Couple one/both 25 and over	92.64	154.40	30.88

Table to show when to apply the 25% in work deduction

Claim type	Standard deduction 15%	Higher rate deduction 25%	Difference between the standard and higher rates	Amount of disregarded earnings required to trigger 25% deduction
Single under 25	£43.82	£73.03	£29.21	£29.22
Single 25 and over	£55.31	£92.19	£36.88	£36.89
Couple both under 25	£68.78	£114.63	£45.85	£45.86
Couple one or both 25 or over	£86.62	£144.71	£58.09	£58.10

Universal Credit Advances

Universal Credit new claims advance and Universal Credit budgeting advance recovery rates are agreed by Universal Credit at the time of payment. Once the Universal Credit claim ends, if there is still an outstanding amount to be recovered, rates are dependent on the benefit recovered from as detailed in the tables above.

Jobseeker’s Allowance (contributory based)

The rate of recovery for JSA(C) is legislatively set as one third of the age-related amount applicable to the claimant. Where this includes a fraction of a penny the amount is rounded down to the nearest whole penny.

Other Benefits

The rate of recovery is unspecified in legislation. As a matter of policy, the maximum rate is usually set at one third of the rate of personal benefit (that is excluding additional allowances for partners and dependants). This is the rate of benefit applicable to the debtor themselves without inclusion of any increases for dependants. Where this includes a fraction of a penny the amount should be rounded down to the nearest whole penny.

Any income being taken into account against the benefit does not affect this calculation, the deduction rate would still be one third of the personal rate.

Example

The debtor has weekly entitlement to Incapacity Benefit of £114.15 and also receives a weekly occupational pension of £105.

The rate for deductions should be £114.15 divided by 3 = £38.05.

Where this calculation results in a deduction rate greater than the amount of benefit in payment then the deduction rate is set so as to leave 10p a week benefit in payment. For Universal Credit and new style JSA and ESA the deduction rate should be set to leave 1p in payment in the given assessment period.

Direct Earnings Attachment (DEA)

When a DEA notice is issued to the debtor’s employer, it will confirm whether the higher rate of deduction is applicable. It is the employer’s responsibility to calculate the amount of deduction based on net debtor’s net earnings and in accordance with the following table.

The table below is for calculation of the deduction at the standard rate:

Employee paid daily	Employee paid weekly	Employee paid monthly	Deductions from earnings
Up to £15	Up to £100	Up to £430	Nil
Between £15.01 - £23	Between £100.01 - £160	Between £430.01 - £690	3%
Between £23.01 - £32	Between £160.01 - £220	Between £690.01 - £950	5%
Between £32.01 - £39	Between £220.01 - £270	Between £950.01 - £1160	7%
Between £39.01 - £54	Between £270.01 - £375	Between £1160.01 - £1615	11%
Between £54.01 - £75	Between £375.01 - £520	Between £1615.01 - £2240	15%
£75.01 and more	£520.01 and more	£2240.01 and more	20%

The table below is for calculation of the deduction at the higher rate (prosecuted fraud cases):

Employee paid daily	Employee paid weekly	Employee paid monthly	Deductions from earnings
Up to £15	Up to £100	Up to £430	5%
Between £15.01 - £23	Between £100.01 - £160	Between £430.01 - £690	6%
Between £23.01 - £32	Between £160.01 - £220	Between £690.01 - £950	10%
Between £32.01 - £39	Between £220.01 - £270	Between £950.01 - £1160	14%
Between £39.01 - £54	Between £270.01 - £375	Between £1160.01 - £1615	22%
Between £54.01 - £75	Between £375.01 - £520	Between £1615.01 - £2240	20%
£75.01 and more	£520.01 and more	£2240.01 and more	40%

Hardship

The deduction rates outlined above should be used to calculate the maximum deduction that is allowable in law. The policy intent is to uphold the maximum rate of deduction. However, the debtor claims hardship as detailed in the main body of this guide, a reduced repayment rate can be considered.

Appendix 3 - Priority of deductions

Schedule 9 of The Social Security (Claims and Payments) Regulations 1987, prescribes what deductions may be made from prescribed benefit and what payments may be paid direct to third parties. It also details the maximum amount deductible and the order of priority. This only covers external third parties such as utility suppliers and local authorities, not Social Fund and overpayment recovery.

Order of Priority - Paragraph 9(1B)

arrears of mortgage interest
arrears of housing costs
arrears of service charge for fuel, and rent not included in housing costs
arrears of fuel costs
arrears of water charges
arrears of Council Tax
court fines
Child Support Maintenance (before 3 March 2003)
integration loans
repayment of Tax Credit overpayments (referred under third party scheme)

Maximum Deduction Rate for the Above

For income related benefits, this is set at 1 x 5% of the personal allowance for a single person aged 25 or over, rounded up to the nearest 5p.

Example

Income Support 25 year old personal allowance rate from April 2021 = £74.70.

5% of £74.70 = £3.72

Rounded up to nearest multiple of 5p = £3.75.

For multiple deductions the rate is limited to 3 times the single debt rate.

Example

Single deduction rate = £3.75.

Multiple deduction rate = £3.75 x 3 = £11.25.

These rates also apply to any other benefit combined and paid with Income Support or Jobseeker’s Allowance.

The recovery of Social Fund loans and benefit overpayments are not included within the above legislation. It has been decided under current policy to place these at the end of the above order of priority, in the following order:

Social Fund loan repayment
Administrative Penalty
DWP and Tax Credit overpayment recovery
Civil Penalty

Social Fund loan repayment is subject by Social Fund legislation to its own repayment rate, previously agreed by the debtor. It should take into account the debtor’s commitments.

For Social Fund debtors moving to Universal Credit digital their recovery rate at the date of move will remain the same until all loans are recovered.

Overpayment Recovery

Overpayment recovery is subject by legislation to a maximum rate of recovery, and also to a maximum amount of deduction for multiple debts from the priority list.

Example

Claimant’s Income Support award has third party deductions for arrears of fuel costs amounting to £6.80 a week.

The outstanding overpayment is recoverable at the standard rate of £11.25 The maximum deduction rate from benefit is £11.25.

The balance available for overpayment recovery is £11.25 - £6.80 = £4.45.

Other Deductions

The following deductions may be made over and above any other deduction, and do not affect the amount of recovery determined above:

arrears of Community Charge
current costs/usage made from benefit
mortgage interest
housing costs
miscellaneous housing costs
service charges for fuel, and rent not included in housing costs;
fuel costs
water charges
Reduced Benefit Direction by the Child Support Agency
flat rate maintenance

Appendix 4 - Priority of deductions from Universal Credit

The Universal Credit, Personal Independence Payment, Jobseeker’s Allowance and Employment and Support Allowance (Claims and Payments) Regulations 2013 Schedule 6 prescribes what deductions may be made from prescribed benefit and what payments may be paid direct to third parties. It also details the maximum amount deductible and the order of priority.

The maximum amount that can be deducted from Universal Credit is an amount equivalent to 40%, however, as a matter of policy from October 2019 this is restricted to 30% of the claimant’s Universal Credit Standard Allowance. From April 2021 this is restricted to 25%. There are 2 exceptions to this which are:

deductions for normal consumption of utilities do not count towards the 25% maximum
if a sanction or penalty is being applied, priority deductions, for example housing and fuel costs, are still taken even if the total amount of deductions is higher than the 25%

A maximum of 3 third party deductions are taken at any given time and if the claimant is receiving insufficient Universal Credit to meet the deductions the priority order listed below is applied.

Order of Priority

Fraud sanctions
Conditionality sanctions
Universal Credit advance of benefit (new claim or change of circumstances)
Universal Credit advance of benefit (benefit transfer)
Budgeting advance
Owner-occupier service charges arrears
Rent, including service charges, arrears (minimum deduction rate 10%)
Fuel arrears (gas and/or electricity)
Council Tax or Community Charge arrears
Fines or Compensation Orders (taken at deduction rate 5%)
Water charges arrears
Old scheme Child Maintenance
Flat rate maintenance
Social Fund loans
Recoverable hardship payments
Housing Benefit and DWP Administrative Penalties
Housing Benefit, Tax Credit and DWP Fraud overpayments
Housing Benefit and DWP Civil Penalties
Housing Benefit, Tax Credit and DWP normal overpayments
Integration loan arrears
Eligible loan arrears
Rent, including service charges arrears (maximum deduction rate of up to a maximum 20%, inclusive of the minimum 10% applied above)

Example

Claimant is receiving Universal Credit of £317.82.

He has deductions for rent arrears – deducted at 10%, and electricity and Council Tax Rent arrears – deducted at 5% each. This totals (1 x 10%) + (2 x 5%) of the claimants Universal Credit standard allowance.

It then transpires the claimant has a fraud classified overpayment. As the claimant already has deductions totalling 20%, the maximum that can be deducted for the fraud debt is 5% of his Universal Credit standard allowance. (20% + 5% = 25%).

Note - Where we are also deducting for fuel arrears we also make a deduction for on-going consumption. The on-going consumption does not count towards the 25% maximum deduction.

The sub-order rules are:

a) Categories 16 or 18 - where there are debt balances for both DWP and Local Authority (LA) debt to be recovered in the same category then the deduction is split equally between the 2 debt owners, for example 50% to DWP debt and 50% to LA debt.

b) Categories 17 or 19 - where there are debt balances for more than one of DWP, LA or HMRC debt to be recovered in the same category then the deduction is split equally between the 2 or 3 owners.

c) Categories 1 to 5 or 15 to 19 - subject to the priority order in 1 to 23 and (a) and (b) above, where the recovery is via a deduction from a joint Universal Credit claim then the recovery is allocated to DWP joint debt ahead of any DWP single debt.

d) Subject to all the above rules recovery is allocated to the oldest debt first.

Maximum Deduction Rates

Third party deductions are deducted at an amount equivalent to between 5% and 20% of the claimant’s Universal Credit standard allowance. If required, a deduction is also taken for ongoing consumption of gas, electricity and water, which are deductible at variable rates dependant on the claimant’s usage.

Fines are recovered at 5% of the Universal Credit Standard Allowance. Any other deductions being taken reduce the maximum deduction rate pound for pound, so that the total of all deductions doesn’t go above the overall maximum deduction rate of 25% of the claimant’s Universal Credit Standard Allowance.

Flat rate maintenance is deducted at a set rate. Currently the set rate for the 2003 scheme is £5 a week (£21.67 a month). For the 2012 scheme this is £7 a week and in addition to this there is a 20% collection charge making that payment £8.40 a week (£36.40 a month). For the 1993 scheme the set rate is £7.20, but where the charge is made through benefit as a third party deduction, the amount taken is restricted to 5% of the claimant’s standard allowance. A claimant can have a percentage of their applicable set rate deducted if they have joint responsibility for a child.

Social Fund loans continue to be recovered at the rate that was last agreed with the claimant.

The maximum deduction rate for Recoverable Hardship Payments, Administrative Penalties, Fraud Penalties and Sanctions and Fraud overpayments is an amount equivalent to 40% of the claimant’s Universal Credit Standard Allowance, but this is restricted to an amount equivalent to 25% as a matter of policy.

The maximum deduction rate for Civil Penalties and Ordinary Overpayments is an amount equivalent to 15% of the claimant’s Universal Credit standard allowance. Where there are earnings, this can be increased to 25% of the claimant’s Universal Credit standard allowance. As a matter of policy we would only apply this if the monthly household earnings are above £60.

Appendix 5 - Abandonment Criteria

There is no automatic right to abandonment and DWP is under no obligation to consider a debt for abandonment, regardless of value of the debt or after any given period of time has elapsed.  

Conditions for abandonment

Where the total owed by the debtor is less than £1 this can be considered for abandonment.

Where any of the following conditions apply, any balance of the overpayment outstanding may be considered for abandonment:

The outstanding balance of the debt is below £25 and:

a) a final demand is issued and

b) no further recovery action can be taken and

c) it is not the subject of criminal proceedings.

The outstanding debt exceeds £25, and a defined period has elapsed in which there has been no effective recovery.

Amount of debt	Time elapsed since last recovery
Under £100	At least 6 years
Under £300	At last 10 years
Over £300	At least 20 years

The debtor is sent to prison and the sentence does not relate to a benefit offence the debt may be written off where the length of the sentence and balance outstanding satisfy the following criteria:

Sentence	Overpayment classification	Amount of debt
3 to 10 years	M	Less than £500
5 to 10 years	F	Less than £500
10 years or more	M or F	Any amount

M = Mistake by debtor.

F = Fraud, either on conviction, admitted after caution or acceptance of an administrative penalty.

The debtor has been deported or gone abroad, and:

a) a UK benefit is not payable abroad; and/or

b) there is no likelihood of their return to the UK, or the payment of UK benefit at some future date, for example Retirement Pension.

Appendix 6 - Classification

Once an overpayment has been calculated then it needs to be classified and a decision made that it is recoverable and who it is recoverable from. This is unless the overpayment is a payment made to a single claimant after death (DPAD) or a SMOP. A SMOP is a non-fraud overpayment with a value of £65 or less. See paragraphs 2.16 to 2.18 for details

Classification is an indicator that describes the type of overpayment and has a bearing on subsequent recovery action. The current classifications are as follows:

F – Overpayment arose due to fraud.

M – Overpayment arose due to claimant error.

OE – Overpayment arose due to official error.

CL – A common law overpayment that arose on account of an overpayment made outside an award.

O – Other.

For Universal Credit and new style JSA and ESA debt, we only need to differentiate fraud overpayments, and overpayments where there is an associated penalty. This is because under Universal Credit all overpayments are classified as recoverable.

The new classifications for Universal Credit and new style JSA and ESA debt are as follows:

F - Overpayment arose due to fraud (defined as where the person has been found guilty of an offence, made an admission under caution or accepted an administrative penalty).

R - All other recoverable amounts.

Appendix 7 - Insolvency table

Insolvency Type	Action during insolvency	Is the debt Included?	Action after insolvency – benefit debt	Action after insolvency – Social Fund
Bankruptcy (England and Wales)	Suspend recovery	Debts occurred before, or spanning the bankruptcy would be included. Debt identified after the bankruptcy would also be included if it satisfies the same criteria.	Any benefit debt would be written off on discharge unless it is classified as Fraud.	The Social Fund loan is not written off and recovery can recommence. If the insolvency is pre 19 March 2012 then the Social Fund loan would be written off unless classified as fraud.
DRO (England and Wales)	Suspend recovery	The customer is responsible for including their debts – they are not automatically included.	If the DWP debt was included, then it would be written off unless it is classified as fraud. Where not included recovery would re-commence.	The Social Fund loan is not written off and recovery can recommence. If the insolvency is pre 19 March 2012 then the Social Fund loan would be written off unless classified as fraud.
Administration Order (England and Wales)	Suspend recovery	The customer is responsible for including their debts – they are not automatically included.	If the DWP debt was not fully repaid during the order period, then recovery would recommence	The SF loan is not written off and recovery can recommence. If the insolvency is pre 19 March 2012 then the SF loan would be written off unless classified as fraud.
Administration Order with a Composition Order (England and Wales)	Suspend recovery	The customer is responsible for including their debts – they are not automatically included.	If the DWP debt was included, then it would be written off. This includes debts arising through fraud. Where not included recovery would recommence.	If the Social Fund loan is included in the order, then it would be written off. If not recovery can recommence
IVA (England and Wales)	Suspend recovery	The customer is responsible for including their debts – they are not automatically included.	If the DWP debt was included, then it would be written off unless it is classified as Fraud. Where the debt is not included in the IVA recovery would recommence.	The SF loan is not written off and recovery can recommence. If the insolvency is pre 19 March 2012 then the SF loan would be written off unless classified as fraud.
Sequestration (Scotland)	Suspend recovery	Debts occurred before, or spanning the sequestration would be included. Debt identified after the sequestration would also be included if it satisfies the same criteria.	If the DWP debt was included, then it would be written off unless it is classified as Fraud.	The Social Fund loan would be written off.
MAP (Scotland)	Suspend recovery	The customer is responsible for including their debts as not all are automatically included.	If the DWP debt was included, then it would be written off unless classified as Fraud. Where not included recovery would recommence.	The Social Fund loan would be written off.
Trust Deeds (unprotected and protected) (Scotland)	Recovery would continue until the Trust Deed becomes Protected	The customer is responsible for including their debts – they are not automatically included. Debts identified after the end of the Trust Deed would not be included.	If the DWP debt was included, then it would be written off unless it is classified as Fraud. Where not included recovery would recommence.	The Social Fund loan would be written off
DAS (Scotland)	Recovery would continue where our debt is not included. This includes the recovery of Social Fund loans.	The customer is responsible for including their debts – they are not automatically included.	If the DWP debt was included, then it would be written off unless it is classified as Fraud.	Where included in the DAS the Social Fund loan is written off.

Unless specifically stated otherwise any debt arising through fraud would not be included in the insolvency

Appendix 8 - Legislation for the overpayment process

Subject	Legislation
Administrative penalty	SS Administration (Fraud) Act 1997 SS Administration Act 1992, S115A
Civil Penalty	SS Administration Act 1992 S115C/D
Couples, recovery from partner	SS (Payments on Account, Overpayments and Recovery) Regulations 1988, Regulation 17
Decision making and appeals	SS (Decision Making and Appeals) Act 1998
Diminution of capital	SS (Payments on Account, Overpayments and Recovery) Regulations 1988, Regulation 14 SS (Overpayments and Recovery) Regulations 2013 Regulation 7
Direct Earnings Attachment (DEA)	Social Security (Overpayments and Recovery) Regulations 2013 Part 6 SS Administration Act 1992 S 78 (3C) - Social Fund debt through DEA
Direct Payment	SS (Payments on Account, Overpayments and Recovery) Regulations 1988, Regulation 11
Fraud rate of deduction	SS Payments on Account, Overpayments and Recovery) Regulations 1988, Regulation 16(5)
Insolvency	Insolvency Act 1986 Section 281(3) – fraud debts not discharged in bankruptcy Insolvency Act 1986 Section 251I (3) – fraud debts not discharged in DRO Insolvency (amendment) Rules 2012 Rule 3 (2)(e) - Social Fund classed as an ‘excluded debt’
Interim payment	SS (Payments on Account, Overpayments and Recovery) Regulations 1988, Regulations 2-4
Northern Ireland offset	SS (Payments on Account, Overpayments and Recovery) Regulations 1988, Regulations 5-6 and 13
Prevention of duplication of payments	SS Administration Act 1992, S74 SS (Payments on Account, Overpayments and Recovery) Regulations 1988, Regulations 7-9 SS (Overpayments and Recovery) Regulations 2013 Regulation 6
Priority of Deductions from benefit	SS (Claims and Payments) Regulations 1987, Schedule 9
Recoverable overpayment	SS Administration Act 1992, S71 SS (Overpayments and Recovery) Regulations 2013 Regulations 3-5
Recovery from estates	Administration of Estates Act 1925
Recovery by deduction from benefit	SS (Payments on Account, Overpayments and Recovery) Regulations 1988, Regulations 15-16 SS (Overpayments and Recovery) Regulations 2013 Regulations 10-16
Social Fund	SS Act 1998, S75 SS Administration Act 1992, Ss71ZA & 78 Insolvency Act 1986 Regulation 281 (6) – Social Fund debt not discharged after March 2012
Standard rate of deduction	SS (Payments on Account, Overpayments and Recovery) Regulations 1988, Regulation 16(4)(b)
Recovery from arrears of benefit	SS (Payments on Account, Overpayments and Recovery) Regulations 1988, Regulation 16(3)
Recovery from couples (joint debt)	SS Administration Act 1992 S71ZB (2)(b)
Limitations for recovery	Prescription and Limitations Act (Scotland) 1973

(The Child Poverty Action Group v Secretary of State for Work and Pensions (2010) UKSC 54) ↩

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Introduction

Policy statement

Chapter 1 - How overpayments arise

How do overpayments arise?

Recovery under social security legislation

Mistake by the claimant

Fraud by the claimant

Interim payments

Short term benefit advance - Legacy

Universal Credit New Claim Advance

Universal Credit Benefit Transfer Advance

Universal Credit Budgeting Advance

Universal Credit recoverable hardship payments

Overpayment due to late award of other benefit/income

Overpayments due to the way in which the Direct Payment banking system operates

Official Error

Overpayments not covered under Social Security legislation

Overprovision

Official Error

Error by Third Party

Ex-Statutory Payments (non-prescribed payments)

Benefit paid before due payday

Direct payment made after death (DPAD)

Social Fund Overpayments

Chapter 2 - When and from whom do we seek recovery?

General

Recovery under Social Security legislation

Misrepresentation or failure to disclose

What Benefit Overpayments are covered by this legislation?

Recoverability not dependent on misrepresentation or failure to disclose

Overpayments where recovery is not covered under Social Security legislation

The Small Overpayment (SMOP) Limit

Who do we seek recovery from?

Recovery of Universal Credit housing costs

Changes to persons from whom recovery is sought

Chapter 3 - Calculation of overpayments and decision making

How is the overpayment calculated?

Example

Third party payments

Decision making – overpayment

Decision Making - Penalties

Offsetting

Types of offset

Offsetting prior payment against subsequent award

Example 1 - underpayment

Example 2 - overpayment

Example 3 - no overpayment or underpayment

Underlying entitlement to Income related benefits.

Example

Prevention of duplication of payment (PODOP)

Example

Diminution of Capital

Example

Notification of the overpayment and Civil Penalty

Chapter 4 - Appeals and Disputes

Overpayment decision disputed

General

Mandatory reconsideration of the overpayment decision

Mandatory reconsideration request received over one month and one day since decision or WSOR

Appeal - Direct Lodgement

Appeal received over one month since decision issued

Appeal heard by first-tier Tribunal

Refunds during the reconsideration/appeal process

Over-recovery following Tribunal decision

Chapter 5 - How do we recover?

General

Penalties

Recovery by deduction from benefit

Recovery from income related benefits (except Universal Credit)

Recovery from New Style JSA and ESA

Recovery from Universal Credit

Recovery from non-income related benefit (where no income related benefit is in payment)

Recovery from non-income related benefit (where there is also income related benefit in payment)

Recovery from non-income related benefit (where there would be entitlement to an income related benefit if there were no contributory benefit in payment)

Example

Example

Impact of other deductions

Low rates of benefit

Example