If our local authority offer tenants, in underoccupied property, money in order that they move to a smaller property - how would this be treated for means tested benefits?

We're thinking it should be classed as capital but welcome any comments from our fellow welfs.

It's a one off lump sum and therefore should be treated as capital.
However, as a side issue, and depending on the size of the payment, the LA will be aware, from their existing HB awards of the financial implications for some tenants - ie, that their increase in savings may have a detrimental effect on their claims for I/S, GPC, HB & CTB.

Any letters sent out making this offer of a financial incentive to move house should make it very clear that this could happen, and be advising tenants to seek independent advice.