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Annex B: Treatment of Capital

September 2017: This appendix was updated to include changes from the Care and Support Statutory Guidance. New bullet points have been added at 33 (g) (xi); (xii); and (xiii).

This annex covers:

The treatment of capital when conducting a financial assessment in all circumstances.

1) This section of the guidance applies where a local authority has chosen to charge a person for the services it is arranging and therefore must undertake a financial assessment. When doing so, it must assess the income and capital of the person. This annex covers the treatment of capital and should be read in conjunction with Annex C on the treatment of income. The details of the sources capital which local authorities must disregard are set out in regulations.

2) The financial assessment will need to look across all of a person’s assets – both capital and income – decide which is capital and which is income, and assess those assets according to the regulations and guidance. A local authority therefore must also refer to Annex C on the treatment of income and Annex E on deprivation of assets before conducting a financial assessment. The treatment of income will vary depending on the type of setting a person is receiving care in. The treatment of capital, as set out in this annex, is broadly the same for all settings. Where there is a distinction between care homes and all other settings, this is clearly set out.

3) In assessing what a person can afford to contribute a local authority must apply the upper and lower capital limits. The upper capital limit is currently set at £23,250 and the lower capital limit at £14,250.

4) A person with assets above the upper capital limit will be deemed to be able to afford the full cost of their care. Those with capital between the lower and upper capital limit will be deemed as able to make a contribution, known as ‘tariff income’, from their capital. Any capital below the lower capital limit should be disregarded. Further details are set out in paras. 24 to 27.

Defining capital

What is capital?

5) Capital can mean many different things and the intention is not to give a definitive definition here as a local authority will need to consult the regulations and consider the individual asset on its merits. In general it refers to financial resources available for use and tends to be from sources that are considered more durable than money in the sense that they can generate a return.

6) The following list gives examples of capital. This list is intended as a guide and is not exhaustive:

(a) buildings

(b) land

(c) National Savings Certificates and Ulster Savings Certificates

(d) Premium Bonds

(e) stocks and shares

(f) capital held by the Court of Protection or a Deputy appointed by that Court

(g) any savings held in:

(i) building society accounts

(ii) bank current accounts, deposit accounts or special investment accounts. This includes savings held in the National Savings Bank, Girobank and Trustee Savings Bank.

(iii) SAYE schemes

(iv) unit trusts

(v) co-operatives share accounts.

(vi) cash

h) trust funds

7) It is important that people are not charged twice on the same resources. Therefore, resources should only be treated as income or capital but not both. If a person has saved money from their income then those savings should normally be treated as capital. However they should not be assessed as both income and capital in the same period. Therefore in the period when they are received as income, the resource should be disregarded as capital.

Cases where it is not clear whether a payment is capital or income

8) In assessing a person’s assets it may not be immediately clear where a resource is capital or income, particularly where a person is due to receive planned payments. In order to guide a local authority’s decision, in general, a planned payment of capital is one which is:

(a) not in respect of a specified period

(b) not intended to form part of a series of payments

9) Local authorities should also have regard to the guidance on capital treated as income at paragraph 55.

Who owns the capital?

10) A capital asset is normally defined as belonging to the person in whose name it is held, the legal owner. However in some cases this may be disputed and/or beneficial ownership argued. Beneficial ownership is where someone enjoys the benefits of ownership, even though the title of the asset is held by someone else or where they directly or indirectly have the power to vote or influence a transaction regarding a particular asset. In most cases the person will be both the legal and beneficial owner.

11) Where ownership is disputed, a local authority should seek written evidence to prove where the ownership lies. If a person states they are holding capital for someone else, the local authority should obtain evidence of the arrangement, the origin of the capital and intentions for its future use and return to its rightful owner.

 


Example of capital dispute: 1

Arlene has £14,000 in a building society account in her own name. She says that £3,000 is set aside for her granddaughter’s education. Unfortunately there is no deed of trust or other legal arrangement which would prevent Arlene using the whole amount herself. She is therefore treated as the beneficial owner of the whole amount.

Example of capital dispute: 2

Lisa has £10,000 in a bank account in her own name and shares valued at £6,500. She provides evidence to show that the shares were purchased on behalf of her son who is abroad and that they will be transferred to her son when he returns to the UK. Although Lisa is the legal owner, she is holding the shares in trust for her son who is the beneficial owner. Only the £10,000 is therefore treated as Lisa’s capital.

 


12) Where a person has joint beneficial ownership of capital, except where there is evidence that the person own an unequal share, the total value should be divided equally between the joint owners and the person should be treated as owning an equal share. Once the person is in sole possession of their actual share, they can be treated as owning that actual amount.

13) In some cases a person may be the legal owner of a property but not the beneficial owner of a property. In other words, they have no rights to the proceeds of any sale. In such circumstances the property must not be taken into account.

Calculating the value of capital

14) A local authority will need to work out what value a capital asset has in order to take account of it in the financial assessment. Other than National Savings Certificates, valuation must be the current market or surrender value of the capital asset, e.g. property, whichever is higher, minus the following:

(a) 10% of the value if there will be any actual expenses involved in selling the asset. This must be expenses connected with the actual sale and not simply the realisation of the asset. For example the costs to withdraw funds from a bank account are not expenses of sale, but legal fees to sell a property would be

(b) any outstanding debts secured on the asset, for example a mortgage

15) A capital asset may have a current market value, for example stocks or shares, or a surrender value, for example premium bonds. The current market value will be the price a willing buyer would pay to a willing seller. The way the market value is obtained will depend on the type of asset held.

16) If the person and the assessing officer both agree that after deducting any relevant amounts set out in paragraph 14 that the total value of the person’s capital is more than the upper capital limit of £23,250, or less then the lower capital limit of £14,250, then it is not necessary to obtain a precise valuation. If there are any disputes, a precise valuation should be obtained. However, the local authority should bear in mind how close someone is to the upper capital limit when deciding whether or not to obtain a precise valuation.

17) Where a precise valuation is required, a professional valuer should be asked to provide a current market valuation. Once the asset is sold, the capital value to be taken into account is the actual amount realised from the sale, minus any actual expenses of the sale.

18) Where the value of a property is disputed, the aim should be to resolve this as quickly as possible. Local authorities should try to obtain an independent valuation of the person’s beneficial share of the property within the 12-week disregard period where a person is in a care home. This will enable local authorities to work out what charges a person should pay and enable the person, or their representative, to consider whether to seek a deferred payment agreement.

19) The value of National Savings Certificates (and Ulster Savings Certificates) (Premium Bonds) is assessed in the same way as other capital assets. A valuation for savings certificates can be obtained by contacting the NS&I helpline on 0845 964 5000. An alternative method to get the value of National Savings Certificates is to use the NS&I online calculator. To enable an accurate value for the savings certificates the person must provide details of the:

  • certificate issue number(s)
  • purchase price
  • date of purchase

Assets held abroad

20) Where capital is held abroad and all of it can be transferred to the UK, its value in the other country should be obtained and taken into account less any appropriate deductions under paragraph 14. Where capital is held jointly, it should be treated the same as if it were held jointly within the UK. The detail will depend on the conditions for transfer to the UK.

21) Where the capital cannot be wholly transferred to the UK due to the rules of that country, for example currency restrictions, the local authority should require evidence confirming this fact. Examples of acceptable evidence could include documentation from a bank, government official or solicitor in either this country or the country where the capital is held.

22) Where some restriction is in place, a local authority should seek evidence showing what the asset is, what its value is and to understand the nature and terms of the restriction so that should this change, the amount can be taken into account. It should also take into account the value that a willing buyer would pay in the UK for those assets, but be aware that it may be less than the market or surrender value in the foreign country.

Capital not immediately realisable

23) Capital which is not immediately realisable due to notice periods, for example National Savings Bank investment accounts or Premium Bonds, should be taken into account in the normal way at its face value. This will be the value at the time of the financial assessment. It may need to be confirmed and adjusted when the capital is realised. If the person chooses not to release the capital, the value at the time of assessment should be used and it should be reassessed at intervals in the normal way.

Capital limits

Upper and lower capital limits

24) The capital limits set out at what point a person is able to access local authority support and how much support they receive. However, local authorities have discretion to set higher capital limits for people receiving care other than in a care home. Subject to the above the local authority must apply the capital limits. The capital limits for financial year 2015 to 2016 are:

(a) upper capital limit: £23,250

(b) lower capital limit: £14,250

25) If a person clearly has capital in excess of the upper capital limit, there is no need to make a wider assessment. If a person is near the upper capital limit, the local authority should be mindful of the need to plan ahead for when assets have been spent down and a person may therefore fall below the upper capital limit.

This will help reduce burdens on both the local authority and the person from needing to repeat the financial assessment within a short timeframe.

26) The capital which a person has below the lower capital limit must be disregarded in the calculation of tariff income (see below).

Tariff income

27) Where a person has assets between the lower and upper capital limits the local authority must apply tariff income. This assumes that for every £250 of capital, or part thereof, a person is able to afford to contribute £1 per week towards the cost of their eligible care needs.

 


Example of tariff income

Nora has capital of £18,100. This is £3,850 above the lower capital limit of £14,250. Dividing the £3,850 by £250 produces a figure of £15.40. When calculating tariff income, the amount is always rounded up. This therefore gives a tariff income of £16 per week.

 


Notional capital

28) In some circumstances a person may be treated as possessing a capital asset even where they do not actually possess it. This is called notional capital.

29) Notional capital may be capital which:

(a) would be available to the person if they applied for it

(b) is paid to a third party in respect of the person

(c) the person has deprived themselves of in order to reduce the amount of charge they have to pay for their care

30) A person’s capital should therefore be the total of both actual and notional capital. However, if a person has actual capital above the upper capital limit, it may not be necessary to consider notional capital.

31) Where a person has been assessed as having notional capital, the value of this must be reduced over time. The rule is that the value of notional capital must be reduced weekly by the difference between the weekly rate the person is paying for their care and the weekly rate they would have paid if notional capital did not apply.

 


Example of diminishing notional capital

Hayley is receiving care and support in a care home. She is assessed as having notional capital of £20,000 plus actual capital of £6,000. This means her assets are above the upper capital limit and she needs to pay the full cost of her care and support at £400 per week.

The notional capital should therefore be reduced by the difference between the sum Hayley is paying (£400) and would have paid without the notional capital (£100).

If she did not have the notional capital it would not affect her ability to pay. This is as she has an income of £120.40 and a personal allowance of £24.40 per week and would therefore be assessed as being able to pay £100.

 


32) Where a person is benefiting from the 12-week property disregard and has chosen to pay a ‘top-up’ fee from their capital resources between the upper and lower capital limits, the level of tariff income that applies during those 12 weeks is the same as it would be if the person were not using the capital to ‘top-up’.

Capital disregarded

33) The following capital assets must be disregarded:

(a) property in specified circumstances (see paragraph 34)

(b) the surrender value of any:

(i) life insurance policy

(ii) annuity

(c) payments of training bonuses of up to £200

(d) payments in kind from a charity

(e) any personal possessions such as paintings or antiques, unless they were purchased with the intention of reducing capital in order to avoid care and support charges (Schedule 2, para. 13)

(f) any capital which is to be treated as income or student loans

(g) any payment that may be derived from the:

(i) Macfarlane Trust

(ii) Macfarlane (Special Payments) Trust

(iii) Macfarlane (Special Payment) (No 2) Trust

(iv) Caxton Foundation

(v) The Fund (payments to non-haemophiliacs infected with HIV)

(vi) Eileen Trust

(vii) MFET Trust

(viii) Independent Living Fund (2006)

(ix) Skipton Fund

(x) London Bombings Relief Charitable Fund

(xi) Scottish Infected Blood Support Scheme

(xii) London Emergencies Trust

(xiii) We Love Manchester Emergency Fund

(h) the value of funds held in trust or administered by a court which derive from a payment for personal injury to the person. For example, the vaccine damage and criminal injuries compensation funds

(i) the value of a right to receive:

(i) income under an annuity

(ii) outstanding instalments under an agreement to repay a capital sum

(iii) payment under a trust where the funds derive from a personal injury

(iv) income under a life interest or a life-rent

(v) income (including earnings) payable in a country outside the UK which cannot be transferred to the UK

(vi) an occupational pension

(vii) any rent. Please note however that this does not necessarily mean the income is disregarded. Please see Annex C for guidance on the treatment of income.

(j) capital derived from an award of damages for personal injury which is administered by a court or which can only be disposed of by a court order or direction

(k) the value of the right to receive any income under an annuity purchased pursuant to any agreement or court order to make payments in consequence of personal injury or from funds derived from a payment in consequence of a personal injury and any surrender value of such an annuity

(l) periodic payments in consequence of personal injury pursuant to a court order or agreement to the extent that they are not a payment of income and area treated as income (and disregarded in the calculation of income)

(m) any Social Fund payment

(n) refund of tax on interest on a loan which was obtained to acquire an interest in a home or for repairs or improvements to the home

(o) any capital resources which the person has no rights to as yet, but which will come into his possession at a later date, for example on reaching a certain age

(p) payments from the Department of Work and Pensions to compensate for the loss of entitlement to Housing Benefit or Housing Benefit Supplement

(q) the amount of any bank charges or commission paid to convert capital from foreign currency to sterling

(r) payments to jurors or witnesses for court attendance (but not compensation for loss of earnings or benefit)

(s) community charge rebate/council tax rebate

(t) money deposited with a Housing Association as a condition of occupying a dwelling

(u) any Child Support Maintenance Payment

(v) the value of any ex-gratia payments made on or after 1 February 2001 by the Secretary of State in consequence of a person’s, or person’s spouse or civil partner’s imprisonment or internment by the Japanese during the Second World War

(w) any payment made by a local authority under the Adoption and Children Act 2002 (under section 2(b)(b) or 3 of this act)

(x) the value of any ex-gratia payments from the Skipton Fund made by the Secretary of State for Health to people infected with Hepatitis C as a result of NHS treatment with blood or blood products

(y) payments made under a trust established out of funds provided by the Secretary of State for Health in respect of persons suffering from variant Creutzfeldt-Jakob disease to the victim or their partner (at the time of death of the victim)

(z) any payments under Section 2, 3 or 7 of the Age-Related Payments Act 2004 or Age Related Payments Regulations 2005 (SI No 1983)

(aa) any payments made under section 63(6)(b) of the Health Services and Public Health Act 1968 to a person to meet childcare costs where he or she is undertaking instruction connected with the health service by virtue of arrangements made under that section

(bb) any payment made in accordance with regulations under Section 14F of the Children Act 1989 to a resident who is a prospective special guardian or special guardian, whether income or capital

 


Example of disregarded capital

Mr T is a former Far East prisoner of war and receives a £10,000 ex-gratia payment as a result of his imprisonment. He now requires care and support and has a total of £25,000 in capital. When calculating how much capital should be taken into account, the local authority must disregard the first £10,000 – the value of the ex-gratia payment.

The normal capital rules are then applied to the remaining £15,000. In this case, the first £14,250 would be completely disregarded in addition to the £10,000. Tariff income would therefore only be applied to the remaining £750 giving a charge of £3.

 


Property disregards

34) In the following circumstances the value of the person’s main or only home must be disregarded:

(a) where the person is receiving care in a setting that is not a care home

(b) if the person’s stay in a care home is temporary and they either:

(i) intend to return to that property and that property is still available to them

(ii) are taking reasonable steps to dispose of the property in order to acquire another more suitable property to return to

(c) where the person no longer occupies the property but it is occupied in part or whole as their main or only home by any of the people listed below, the mandatory disregard only applies where the property has been continuously occupied since before the person went into a care home (for discretionary disregards see below):

(i) the persons partner, former partner or civil partner, except where they are estranged

(ii) a lone parent who is the person’s estranged or divorced partner;

(iii) a relative as defined in paragraph 35 of the person or member of the person’s family who is either:

1) aged 60 or over

2) is a child of the resident aged under 18

3) is incapacitated

35) For the purposes of the disregard a relative is defined as including any of the following:

(a) parent (including an adoptive parent)

(b) parent-in-law

(c) son (including an adoptive son)

(d) son-in-law

(e) daughter (including an adoptive daughter)

(f) daughter-in-law

(g) step-parent

(h) step-son

(i) step-daughter

(j) brother

(k) sister

(l) grandparent

(m) grandchild

(n) uncle

(o) aunt

(p) nephew

(q) niece

(r) the spouse, civil partner or unmarried partner of (a) to (k) inclusive

36) A member of the person’s family is defined as someone who is living with the qualifying relative as part of an unmarried couple, married to or in a civil partnership.

37) For the purposes of the disregard the meaning of ‘incapacitated’ is not closely defined. However, it will be reasonable to conclude that a relative is incapacitated if one of the following conditions apply:

(a) the relative is receiving one (or more) of the following benefits: incapacity benefit, severe disablement allowance, disability living allowance, personal independence payments, armed forces independence payments, attendance allowance, constant attendance allowance, or a similar benefit

(b) the relative does not receive any disability related benefit but their degree of incapacity is equivalent to that required to qualify for such a benefit. Medical or other evidence may be needed before a decision is reached

38) For the purpose of the property disregard, the meaning of ‘occupy’ is not closely defined. In most cases it will be obvious whether or not the property is occupied by a qualifying relative as their main or only home. However, there will be some cases where this may not be clear and the local authority should undertake a factual inquiry weighing up all relevant factors in order to reach a decision. An emotional attachment to the property alone is not sufficient for the disregard to apply.

39) Circumstances where it may be unclear might include where a qualifying relative has to live elsewhere for the purposes of their employment, for example a member of the armed services or the diplomatic service. Whilst they live elsewhere in order to undertake their employment, the property remains their main or only home. Another example may be someone serving a prison sentence. It would not be reasonable to regard the prison as the person’s main or only home and they may well intend to return to the property in question at the end of their sentence. In such circumstances the local authority may wish to consider the qualifying relative’s length of sentence and the likelihood of them returning to the property. Essentially the qualifying relative is occupying the property but is not physically present.

 


Example of emotional attachment to a property

Bea is 62 years old and lives with her family in Kent. Her father Patrick is a widower who has been living in the family home in Teddington that she and her sister grew up in and where she occasionally stays to help her father. Patrick has been assessed as having eligible care and support needs that are best met by moving into a care home.

Although Bea is over the age of 60, the family home is not her main or only home and the property is therefore not disregarded.

 


Example of occupying a property when not physically present

Matt is 60 years old and has been living overseas for the past 10 years due to his job in the diplomatic service. When he is in England, he lives at the family home he grew up in. His father Ken has been assessed as having eligible care and support needs that are best met by moving into a care home. In Ken’s financial assessment, the value of his property is disregarded as his son Matt is a qualifying relative that occupies the property as his main or only home. Although Matt is not physically present at the property at the point Ken moves into the care home, his alternative accommodation is only as a result of his employment and the family home is his main home.

 


40) The local authority will need to take account of the individual circumstances of each case. However, it may be helpful to consider the following factors in making a decision:

  • does the relative currently occupy another property?
  • if the relative has somewhere else to live do they own or rent the property (i.e. how secure/permanent is it?)
  • if the relative is not physically present is there evidence of a firm intention to return to or live in the property
  • where does the relative pay council tax?
  • where is the relative registered to vote?
  • where is the relative registered with a doctor?
  • are the relatives belongings located in the property?
  • is there evidence that the relative has a physical connection with the property?

41) A property must be disregarded where the relative meets the qualifying conditions (i.e. is aged 60 or over or is incapacitated) and has occupied the property as their main or only home since before the resident entered the care home.

Discretionary disregard

42) A local authority may also use its discretion to apply a property disregard in other circumstances. However, the local authority will need to balance this discretion with ensuring a person’s assets are not maintained at public expense. An example where it may be appropriate to apply the disregard is where it is the sole residence of someone who has given up their own home in order to care for the person who is now in a care home or is perhaps the elderly companion of the person.

 


Example of local authority discretion to apply a property disregard

Jayne has the early signs of dementia but wishes to continue living in her own home. She is not assessed as having eligible needs, but would benefit from some occasional support. Her best friend Penny gives up her own home to move in with Jayne. At this point, there is no suggestion that Jayne may need care in a care home.

After 5 years Jayne’s dementia has reached the point where she needs a far greater level of care and support and following an assessment it is agreed her needs would best be met in a care home. On moving into the care home, the local authority uses its discretion to apply the property disregard as this has now become Penny’s main or only home.

 


43) A property may be disregarded when a qualifying relative moves into the property after the resident enters a care home. Where this happens the local authority will need to consider all the relevant factors in deciding whether the property must be disregarded. Factors such as the timing and purpose of the move may be relevant to establishing if the property is the relative’s main or only home. The purpose of the disregard in these circumstances is to safeguard certain categories of people from the risk of homelessness.

44) The local authority should consider if the principle reason for the move is that it is necessary to ensure the relative has somewhere to live as their main or only home. A disregard would not be appropriate, for example where a person moves into a property solely to protect the family inheritance. Local authorities need to ensure that people are not needlessly maintained at public expense. A local authority will need to take account of the individual circumstances of each case; however, it may be helpful to consider the factors listed above for the mandatory disregard plus the following additional factors in making a decision:

  • was the relative occupying another property as their main or only home at the time of the previous financial assessment?
  • could the relative have reasonably expected to have the property taken into account at the time they moved into the property?
  • would failure to disregard the property result in the eligible relative becoming homeless?
  • would failure to disregard the property negatively impact on the eligible relatives own health and wellbeing?

 


Example of local authority discretion to apply a property disregard where the qualifying person moves into the property after the resident entered the care home

Fred’s family home is unoccupied because his father has died and his mother is in a care home and Fred and his siblings have their own homes. The property is subject to a deferred payments agreement. Fred has a serious accident and becomes incapacitated. As a result he unable to work or pay for his existing home. He has nowhere else to live so he moves into the family home which becomes his only home. In the circumstances, the local authority exercises its discretion to disregard the property.

Example of local authority discretion to apply a property disregard

Hilda is 63 and lives in a rented flat. Her brother, Stephen, has recently died and his wife, Charlotte, has moved in to a care home. Hilda suddenly loses her job and finds she unable to afford to live in her rented flat. As a result, Hilda moves into Stephen and Charlotte’s house and this becomes her only home. In the circumstances, the local authority exercises its discretion to disregard the property.

 


‘12-week property disregard’

45) An important aim of the charging framework is to prevent people being forced to sell their home at a time of crisis. The regulations under the Care Act 2014 therefore create space for people to make decisions as to how to meet their contribution to the cost of their eligible care needs. A local authority must therefore disregard the value of a person’s main or only home for 12 weeks in the following circumstances:

(a) when they first enter a care home as a permanent resident

(b) when a property disregard other than the 12-week property disregard unexpectedly ends because the qualifying relative has died or moved into a care home

46) In addition, a local authority has discretion to choose to apply the disregar when there is a sudden and unexpected change in the person’s financial circumstances. In deciding whether to do so, the local authority will want to consider the individual circumstances of the case. Such circumstances might include a fall in share prices or an unanticipated debt. An example is given below.

 


Example of the end of a property disregard

Win and Ern have been married for 60 years and brought a home together. 18 months ago, Win moved into a care home as a result of dementia. During her financial assessment, the value of the home she shared with Ern was disregarded as Ern is her husband, was over 60 years old and still lived in the property. Ern has been in good health and there is no reason to anticipate a sudden change in circumstance. Unfortunately Ern suffers a heart attack and passes away, leaving the property to Win. There is no longer an eligible person living in the property, meaning its value can now be taken into account in what Win can afford to contribute to the cost of her care.

Given this was unplanned for, Win and her family need time to consider what the best option might be. The 12 week disregard would therefore be applied.

Example of an unexpected change in financial circumstances

Harry is a widower who owns his own home. Ten months ago he moved into a care home as a self-funder. He has been meeting the bulk of his costs from shares he received as part of his redundancy package. Due to an unexpected event, the value of his shared is suddenly reduced by half, meaning he is unable to meet the cost of his care.

Although already in a care home and likely to remain responsible for paying for this care, Harry approaches the local authority for assistance and to seek a Deferred Payment Agreement. During the financial assessment the local authority agrees that the circumstances could not have been foreseen and uses its discretion to disregard the value of his property for the first 12 weeks. This provides Harry with the space he needs to make arrangements for the Deferred Payment Agreement to be put in place and enable him to continue to meet the cost of his care.

 


‘26-week disregard’

47) The following capital assets must be disregarded for at least 26 weeks in a financial assessment. However, a local authority may choose to apply the disregard for longer where it considers this appropriate. For example where a person is taking legal steps to occupy premises as their home, but the legal processes take more than 26 weeks to complete.

a) Assets of any business owned or part-owned by the person in which they were a self-employed worker and has stopped work due to some disease or disablement but intends to take up work again when they are fit to do so. Where the person is in a care home, this should apply from the date they first took up residence. [Schedule 2 Paragraph 9]

b) Money acquired specifically for repairs to or replacement of the person’s home or personal possessions provided it is used for that purpose. This should apply from the date the funds were received. [Schedule 2 Paragraph 12]

c) Premises which the person intends to occupy as their home where they have started legal proceedings to obtain possession. This should be from the date legal advice was first sought or proceedings first commenced. [Schedule 2 Paragraph 22]

d) Premises which the person intends to occupy as their home where essential repairs or alterations are required. This should apply from the date the person takes action to effect the repairs. [Schedule 2 Paragraph 21]

e) Capital received from the sale of a former home where the capital is to be used by the person to buy another home. This should apply from the date of completion of the sale. [Schedule 2 Paragraph 6]

f) Money deposited with a Housing Association which is to be used by the person to purchase another home. This should apply from the date on which the money was deposited. [Schedule 2 Paragraph 11]

g) Grant made under a Housing Act which is to be used by the person to purchase a home or pay for repairs to make the home habitable. This should apply from the date the grant is received [Schedule 4 Paragraph 22]

‘52-week disregard’

48) The following payments of capital must be disregarded for a maximum of 52 weeks from the date they are received:

(a) the balance of any arrears of or any compensation due to non-payment of:

(i) mobility supplement

(ii) Attendance Allowance

(iii) Constant Attendance Allowance

(iv) Disability Living Allowance / Personal Independence Payment

(v) Exceptionally Severe Disablement Allowance

(vi) Severe Disablement Occupational Allowance

(vii) Armed forces service pension based on need for attendance

(viii) Pension under the Personal Injuries (Civilians) Scheme 1983, based on the need for attendance

(ix) Income Support/Pension Credit

(x) Minimum Income Guarantee

(xi) Working Tax Credit

(xii) Child Tax Credit

(xiii) Housing Benefit

(xiv) Universal Credit

(xv) special payments to pre-1973 war widows

As the above payments will be paid for specific periods, they should be treated as income over the period for which they are payable. Any money left over after the period for which they are treated as income has elapsed should be treated as capital. [Schedule 2 Paragraphs 10 and 11]

(b) payments or refunds for:

(i) NHS glasses, dental treatment or patient’s travelling expenses

(ii) cash equivalent of free milk and vitamins

(iii) expenses in connection with prison visits. [Schedule 2 Paragraph 22]

(c) Personal Injury Payments

 


Example of a disregard for 52 weeks

During his financial assessment it is identified that Colin is eligible for Pension Credit but is not currently claiming the support. He is therefore assessed as being able to pay £75 per week towards the cost of his care. Colin tells the local authority that he will apply for Pension Credit. It is explained to him that the level of what he can afford to contribute will be reassessed once he started receiving the additional support. If the payments are backdated, his contributions to the cost of his care will also be backdated and he may therefore need to make an additional payment to meet any arrears. Colin therefore chooses to pay £90 per week. After six weeks, arrears of Pension Credit at £35 per week (£210) are received. What Colin can afford to contribute is reassessed and he is now asked to pay £110 per week. As Colin has been paying £15 a week more than required, he only owes £120 rather than the full £210 of Pension Credit arrears. The remaining £90 of arrears payments should therefore be treated as capital and disregarded

 


‘2-year disregard’

49) Local authorities must disregard payments made under a trust established out of funds by the Secretary of State for Health in respect of vCJD to either a:

(a) member of the victim’s family for 2 years from the date of death of the victim (or from the date of payment from the trust if later)

 

(b) dependent child or young person until they turn 18 [Schedule 2 Paragraph 27]

Other disregards

50) In some cases a person’s assets may be tied up in a business that they own or part-own. Where a person is taking steps to realise their share of the assets, these should be disregarded during the process. However, the person should be required to show that it is their clear intention to realise the asset as soon as practicable. In order to show their intent, the local authority should request the following information:

(a) a description of the nature of the business asset

(b) the person’s estimate of the length of time necessary to realise the asset or their share of it

(c) t statement of what, if any, steps have been taken to realise the asset, what these were and what is intended in the near future

(d) any other relevant evidence, for example the person’s health, receivership, liquidation, estate agent’s confirmation of placing any property on the market

51) Where the person has provided this information to show that steps are being taken to realise the value of the asset, the local authority must disregard the value for a period that it considers to be reasonable. In deciding what is reasonable it should take into account the length of time of any legal processes that may be needed.

52) Where the person has no immediate intention of attempting to realise the business asset, its capital value should be taken into account in the financial assessment. Where a business is jointly owned, this should apply only to the person’s share.

Treatment of investment bonds

53) The treatment of investment bonds is currently complex. This is in part because of the differing products that are on offer. As such, local authorities may wish to seek advice from their legal departments.

54) Where an investment bond includes one or more element of life insurance policies that contain cashing-in rights by way of options for total or partial surrender, then the value of those rights must be disregarded as a capital asset in the financial assessment.

Capital treated as income

55) The following capital payments should be treated as income. Local authorities therefore must have regard to Annex C before conducting their assessments:

(a) any payment under an annuity.

(b) capital paid by instalment where the total of:

(i) the instalments outstanding at the time the person first becomes liable to pay for their care, or in the case of a person in temporary care whom the local authority had previously decided not to charge, the first day on which the local authority decided to charge

(ii) the amount of other capital held by the resident is over £16,000. If it is £16,000 or less, each instalment should be treated as capital [Regulation 16]

Earnings

56) Any income of the person derived from employment must be treated as earnings and not taken into account in the financial assessment.

Income treated as capital

57) The following types of income should be treated as capital:

(a) any refund of income tax charged on profits of a business or earnings of an employed earner; Any holiday pay payable by an employer more than 4 weeks after the termination or interruption of employment

(b) income derived from a capital asset, for example, building society interest or dividends from shares. This should be treated as capital from the date it is normally due to be paid to the person. This does not apply to income from certain disregarded capital

(c) any advance of earnings or loan made to an employed earner by the employer if the person is still in work. This is as the payment does not form part of the employee’s regular income and would have to be repaid

(d) any bounty payment paid at intervals of at least one year from employment as:

(i) a part time fireman

(ii) an auxiliary coastguard

(iii) a part time lifeboat man

(iv) a member of the territorial or reserve forces

(e) charitable and voluntary payments which are neither made regularly nor due to be made regularly, apart from certain exemptions such as payments from AIDS trusts. Payments will include those made by a third party to the person to support the clearing of charges for accommodation

(f) any payments of arrears of contributions by a local authority to a custodian towards the cost of accommodation and maintenance of a child [Regulation 18]

Capital available on application

58) In some instances a person may need to apply for access to capital assets but has not yet done so. In such circumstances this capital should be treated as already belonging to the person except in the following instances:

(a) capital held in a discretionary trust

(b) capital held in a trust derived from a payment in consequence of a personal injury

(c) capital derived from an award of damages for personal injury which is administered by a court

(d) any loan which could be raised against a capital asset which is disregarded, for example the home. [Regulation 21(2)]

59) A local authority should distinguish between:

(a) capital already owned by the person but which in order to access they must make an application for. For example:

(i) money held by the person’s solicitor

(ii) Premium Bonds

(iii) National Savings Certificates

(iv) money held by the registrar of a county court which will be released on application

(b) capital not owned by the person that will become theirs on application, for example an unclaimed Premium Bond win. This should be treated as notional capital. [Regulation 21(2)]

60) Where a local authority treats capital available on application as notional capital they should do so only from the date at which it could be acquired by the person. [Regulation 21(2)]

61) April 2015 saw much greater flexibility introduced regarding how people can access their defined contribution pensions, including enabling them to access their full pension pot. As a result, when applying notional income to a defined contribution pension this should be calculated as the maximum income that would be available if the person had taken out an annuity. Further guidance is provided in paragraph 25 of Annex C.

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