In principle, where a benefit it being repaid, the reduced entitlement of that benefit can be taken into account for HB/CTB (with the express exception of Tax Credits).
HOWEVER.... if the overall effect of the change(s) is beneficial to the clmt, the LA may decide your client falls foul of the "beneficial change" rule. In short, beneficial changes in circs must normally be notified to the LA within one calendar month barring "special circumstances". In your case, this is further complicated by the "relevant benefit" rule (from memory, I *think* CA is such a benefit).
The rule applies where a relevant benefit is awarded, or increased, (but NOT decreased) and this (normally) means the change in circs takes effect from the original effective date of that award or increase - it overrides the "beneficial change" rule.
So, it CA has been awarded, that, in itself, will probably REDUCE HB/CTB as the premium is less than the amount of CA. However, any overpayment will then be subject to correction by the reduction in IB. If there is a net UNDERPAYMENT, the LA may then fall back on the beneficial change rule.
NB: The LA may ask for evidence that the overpaid IB is actually being repaid. If there is no actual repayment of IB, it will count in full for HB/CTB, even if entitlement to IB has been removed.
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