Hi Antonia,
It sounds a bit messy. From what you've been told, it sounds as if IS ceased because client (allegedly) failed to attend a medical. However, if your client is also receiving Incapacity Benefit, that should have ceased as well (if it hasn't, I can't see why IS has ceased) and you'd need to sort out the failure to attend the medical issue. In relation to the HB overpayment, your client should have been notified when HB (and presumably CTB as well) ceased. The local authority should have asked her for confirmation of her actual income (on the presumption that IS had ceased) and assessed her entitlement to HB/CTB based on that. She should have been notified of any resulting overpayment (and her appeal rights explained in the notification letter). You're still within the absolute time limits to lodge a late appeal even if your client was notified, so it's not too late to dispute the overpayment.
However, none of it quite hangs together and I think that if you have a local agency that specialises in benefit advice this might be one to refer on...
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