diminishing capital & IS overpayment

Client’s IS suspended in Nov 2011, because of over 30k savings accumulated from benefits (IS,CA, DLA, DLA child, CTC with disabled child element).  Client disposes of capital which falls below means-tested benefits level by Jan 2012.  In Feb/March 2012, IS is disallowed from Nov 2011, client has fraud interview and HB is suspended. HB reassessed on benefits income other than IS . Client appeals IS disallowance, decision revised and IS reinstated and paid up to June 2012.  June 2012 2 more IS decisions, one disallowing IS from June, other disallowing IS for most of period from 2005 to June 2012.  No IS overpayment recovery decision or decision on fraud prosecution yet, HB still in payment so far.
I don’t want to go into why client kept the benefits money in their account and why and how it was withdrawn and disposed of, too convoluted, but I would be grateful if someone could help me with these issues:
-Does part of capital made up of saved child’s DLA belong to client or to child?: I looked at http://www.rightsnet.org.uk/forums/viewthread/1320/#5087, has anyone any more ideas ,and if Lorna is reading this, what happened in your case?
-diminishing capital:  Is the quarterly diminishing capital rule from reg 14 Payment on accounts etc only relevant for calculating the recoverable amount, so that in periods in which this rule reduces capital below the limit, there is still no entitlement to IS and any HB overpayment would have to be dealt with separately, under HB diminishing capital rules ?  Or can reg 14 create periods of entitlement with passport to HB and a HB OP would only be an issue for periods with no IS entitlement?
- diminishing notional capital rule:  The disallowance decisions say ‘you have capital’, not ‘you are deemed to have’, so DWP might work under assumption that client still has the capital somewhere even though it is no longer in client’s accounts. But assuming there will be a decision that client has notional capital, when does the diminishing notional capital rule start to apply in this case?  From the date client makes a new claim that gets disallowed on notional capital grounds?  Or from the date in Jan 12 when client says capital was disposed of &
client was in receipt of allegedly overpaid IS?

Hi, Andrea, I have only come across your post now as I am trawling for some advice on diminishing capital for another case of mine.  In my previous “excess capital” appeal, it was accepted that DLA for a child is paid to the parent/carer on behalf of the child - it is the child’s money/savings not the parent/carer’s and that the child’s savings cannot be considered when calculating the claimant’s capital. So, if it’s not already too late, any DLA paid on behalf of the child must be disregarded.

Thanks, Lorna, I just saw your reply.  I am still waiting for the appeal submission, so it won’t be too late to use this argument. I suppose my client will have to show somehow that she was saving up her son’s DLA specifically, and not just her benefits in general.