The more generous 52 week disregard for exempt work you are describing applies to incapacity benefit and both versions of employemnt and support allowance, but not to income support. Unfair I know but there it is. There has to be some upside to ESA!
Even for income support, it is only the lack of the higher earnings disregard that matters. The fact of work, if within the exempt work rules, does not of itself disentitle her to income support on the grounds of incaapcity for work. However, as Brian says, anything above the appropriate earnings disregard is deducted from the amount of her income support. The disregard will be £5 if her incapacity is of recent origin, £20 is she is entitled to a disability premium. So if her earnings less the appropriate disregard equal or exceed the amount of her income support, she is not entitled. If it is less, then clearly she is entitled to less. She has thus been overpaid and recoverability seems highly likely, since she will have been instructed that she must notify starting work.
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