Client failed to declare capital of £20k when she applied for IS so now has an overpayment for the period 06/05/05 to 21/08/08 when IS stopped. She has received a letter demanding repayment of all the IS she received, ie the DWP have not applied the diminishing capital rule as in CPAG p1014. DWP cannot tell me what capital they now believe she had at the date of claim, they only investigated far enough to establish that it was over £8000 (the upper threshold at the time). What do I use as the starting point for the diminishing capital calculation - the capital the DWP did find, the client's best estimate of her capital at the time, or £8000?

The client was iro full HB/CTB via IS. Although the LA are now aware of the undisclosed capital and have stopped benefit, they have not yet mentioned an overpayment. When I do the diminishing capital calc for IS, presumably I have to take into account the way her capital would have been drawn down by having to pay full rent and c/tax, as well as having to pay for her own maintenance. Then do the same to apply the diminishing capital calc to the HB/CTB overpayments when the LA wakes up to them.

I feel a spreadsheet coming on. Obviously I will have to take into account the threshold changes for IS, and the difference between thresholds for IS and HB/CTB for part of the period.

You will need to take account of the fact that most LAs live and work in blissful ignorance of the existence of diminishing capital calculations, and do not have the foggiest idea how to go about them. If they try, they often get it wrong unless they have got a special computer programme.

Your cleint needs to get the best evidence possible of actual capital trhoughout the period of claim. That is your starting point and may need getting hold of copies of bank statments etc (it's less than 6 years ago, nobody should throw away financil information less than 6 years old).

Your diminishing bit is the amount by which the client's capital would have decreased if the overpaid benefit had not been paid. That in effect means only the amount of the benefit in question (you will do the same with HB and CTB). Work it out for 13 weeks, take it way from the actual capital at that date.

Calcualte overpayment for next 13 weeks. Now add that to the amount you took off for the previous quarter, and subtract the total from the actual capital at that date.

Repeat as necessary for every 13 week period. In each period you are taking the whole of the total you have arrived at so far from the level of actual capital at the eend of the 13 week period to arrive at a form of notional capital.

Once that notional figure gets below the upper capital limit, your client might have been entiteld to benefit. Work out the entitelment using actual income and tariff income from the notional capital (yes, it gets quite hairy).

Continue until your notional capital reach the lower capital limit, at which there is no longer any overpayment for capital reasons at all.

Or you could ask DWP for a diminishing capital calcualtion because they do have the computer to do it and it produces a nice and (with effort) pretty understandable printout as long as they tell you what assumptions they have made...

Gareth Morgan should be able to tell you if there is any software you can access that does the job.

At the risk of being accused of self-promotion, but actually trying to be helpful and answer the query...

There is a template for a spreadsheet to do these calculations on my website which you can buy access to.

Diminution of capital calculations are obligatory when there is an overpayment caused by excess capital, so if the DWP or LA haven't done one when making an overpayment decision, the decision is incorrect.

And yes, as Ariadne says, the need to do the calculation is too often overlooked and can make a huge difference to the amount of an overpayment. It's not that hard to do on a spreadsheet, provided you have the data for overpayment and actual capital.

I'm still uncertain about how to handle the present sutuation where there are recoverable overpayments of 3 benefits (IS, HB,CTB) for the same period and due to the same reason of failure to disclose capital. I imagine that the policy thinking behind the diminishing capital rule is that, in the absence of benefit, the claimant would have had to live off their capital, reducing it at the same rate as the benefit they wrongly received. So if they had not been getting IS, HB and CTB they would have had to reduce their capital by the combined amount of the IS (for maintenance), the HB (to pay their rent), and the CTB (to pay their c/tax). Shouldn't the combined effect of the 3 benefits be considered in a single diminishing capital calculation, rather than separate calculations for each benefit? Does anybody know where the rules are laid out, eg regs, CDs, or DWP guidance?

Just had another thought - do the diminshing capital rules apply at all if the undisclosed capital was over £8000, or do they only apply if there was some benefit still payable with the undisclosed capital included in the calculation?

the DCR applies whether the assessment is nil or whether there is some benefit payable. However - it only applies to notional capital - ie, where they are satisfied that claimant has spent the capital, and a deprivation decision is given. where a person fails to account for the disposal of their capital, the DM may draw adverse inferences and assume that claimant still has 'actual' capital, and the original amount of assumed 'actual' capital stays, basically until the person accounts for the capital. btw, this isn't the same as not providing receipts. you might find the commentary to reg 51 in the sweet & maxwell bible helpful on this.

There are two diminishing capital rules: the notional capital one (which is applied prospectively, so that no successful application to benefit can be made unless you have dropped down into qualifying levels. That is in reg 51 of the IS regs for IS.

There is a totally separate one for actual capital which only applies in overpayment cases where the reason for the overpayment is excess capital. It produces a weird and surreal increasing gap between the actual amount of capital held at any given time and the "notional" amount produced by the calculation.

This is found in Regulation 13 of the Overpayments and Payments of Account regulations. It is, as Neil (I think it was ) says, mandatory to make the calcualtion in overpayment cases where capital is involved, and is not relevant in any other context.

The mecahnism of the two calcualtions is very slightly different, too.

Remember that it's the entitlement at the date of each calculation as well, so you have to look at the rules, rates, changes of circumstance etc. through the period. We do have a Heath Robinson set-up that uses our previous versions of programs to do this kind of sum for special cases but it's not something that we supply generally.

I've found the reg thanks Ariadne and it appears to apply in my client's situation. I've done the calcs on a spreadsheet (with help!) and the diminishing capital rule reduces the o/payment form £13385, to £8174. I have advised the client to offer this in full and final settlement, supported by the calcs, and withdraw the appeal if the DWP accept. I am keen to do this quickly because it will reduce her capital below £16000 so she can claim IS/HB/CTB again. Many thanks, all.