Recovery of housing benefit overpayments

An overpayment is any housing benefit that has been paid to the claimant, their landlord or someone else, to which the claimant was not entitled.

To be able to recover an overpayment, the local authority must:

• determine whether the overpayment is legally recoverable

• calculate the amount that has been overpaid

• decide whether the overpayment should be recovered and from whom

• determine how much should be recovered, by what means and at what rate

• notify the claimant and any other affected persons within 14 days

Many, but not all, overpayments are legally recoverable by the local authority. The rules are explained as follows.

Payment on account

The local authority must recover the overpayment where it has overestimated a claimant's housing benefit entitlement when making an interim payment, also known as a payment on account.[1]

Official error

Where the overpayment is the result of an official error, the local authority cannot recover it unless the claimant or payee (eg a landlord or agent of the landlord) could reasonably have been expected to realise that it was an overpayment.[2]

It is up to the local authority to demonstrate that the claimant would have known that they had been overpaid.[3]

An official error is a mistake, whether in the form of an act or an omission, by the local authority or the Department for Work and Pensions or a person working on behalf of either. It can include a:[4]

• mistake in calculating the claimant's entitlement

• mistake in calculating the claimant's average earnings from fluctuating part-time employment[5]

• failure to reduce the entitlement when informed of a change in the claimant's circumstances[6]

• failure to ask a relevant question in the claim form[7]

How long the authority can take to process information received before its inaction becomes official error depends on the facts of the individual case.[8]

Other overpayments

Any other overpayment is recoverable, but recovery is at the local authority's discretion.[9]

An error caused in part or wholly by the claimant, someone acting on their behalf, or the recipient of the housing benefit payments is recoverable. For example, where a claimant provided incomplete and misleading information about his immigration status, the resulting overpayment was recoverable in full.[10]

Special rules apply to the recovery of overpayments from bankrupt claimants or claimants subject to a debt relief order.

There are restrictions on when a local authority can make deductions from a claimant's ongoing housing benefit if that person is subject to a debt relief order (DRO).[11]

If a housing benefit claimant is subject to a DRO that includes a housing benefit overpayment as a qualifying debt, the local authority cannot commence or continue to recover that overpayment.[12]

The outstanding amount of overpayment must be written off at the end of the moratorium period, except when an overpayment resulted from fraud, in which case recovery can recommence once the DRO has been discharged.

A debt relief order (DRO) is an insolvency measure designed to help certain people with no realistic chance of paying off their debts.[13] A DRO lasts for 12 months (ie the 'moratorium' period) during which creditors named on the order cannot take any action to recover their money unless they have the court's permission, and after which the debtor will be freed of the debts included in the order (unless their circumstances have significantly improved).

For housing benefit claimant who is an undischarged bankrupt, the local authority cannot commence or continue to recover any overpayments of housing benefit accrued before the making of the bankruptcy order.[14] The outstanding amount of overpayment must be written off when the bankrupt claimant is discharged from bankruptcy (usually one year after the making of the bankruptcy order), except when the overpayment resulted from fraud.

Bankruptcy is an insolvency measure for certain people unable to pay their debts when they become due. A bankruptcy order covers all debts owed by an individual at the time of the making of the bankruptcy order. There is no need to list the creditors and debts covered by the order as in the case of DROs.

Whilst a person is bankrupt most of their assets might be used to pay off their debts. After the bankruptcy period (usually one year) most of the debtor's outstanding debts accrued before the making of the bankruptcy order, including benefit overpayment, are written off. However, this does not apply if an overpayment resulted from fraud, in which cases recovery can recommence once the bankruptcy order has been discharged at the end of the bankruptcy period.[15]

If the claimant is in a standard or mental health breathing space moratorium, the local authority must stop deductions for overpayments of housing benefit. During the moratorium the local authority must not make a new deduction for an overpayment of benefit.[16]

Debts incurred through fraud are excluded from the moratorium.[17] Deductions for fraudulent overpayments can continue during the moratorium period.

To calculate the amount of the overpayment, the local authority should:

• identify the period over which the recoverable overpayment was paid and work how much housing benefit was paid during that period

• calculate the claimant's correct entitlement of benefit for that period (known as 'underlying entitlement' or 'offsetting'). This must take into account all the true circumstances of the case, including any changes of circumstances that the authority was not aware of when determining the claimant's entitlement

The amount of the overpayment is the difference between the amount of housing benefit paid and the correct entitlement for that period.[18]

The DWP states that the most common occurrence of underlying entitlement not being considered by the local authority is when the DWP cancelled a passported benefit for a past period and the claimant may have been entitled to housing benefit because of their low income.[19] The passported benefits are income support, jobseeker's allowance (income-based), employment and support allowance (income-related) and pension credit (guarantee).

The amount of overpayment to be recovered may be reduced where the overpayment was caused by the claimant's capital being wrongly taken into account to recognise that the claimant would have used some of this capital had they not received any housing benefit. This will only apply if the overpayment lasted for more than 13 weeks. Such deductions are calculated according to the 'diminishing capital rule', which dictates that the local authority should assume that the claimant's capital reduces by the amount of the overpayment for each 13-week period.[20] However, if the claimant reclaims housing benefit subsequently, the full amount of capital is taken into account.

The local authority can decide how much of the recoverable overpayment it will recover and whether to do so as a single lump sum or in instalments from payments of housing benefit or other benefits.

Overpayments to local authority tenants can be recovered by adjustments to their rent account.

Recovery can also be enforced through the courts. The amount that a local authority can recover is not limited by any decision of a criminal court to impose a compensation order where a claimant has been found guilt of fraudulently claiming housing benefit.[21]

Recovery by deductions to benefits

The rate of recovery by deductions to housing benefit or other benefit payments is subject to a maximum limit.[22]

The maximum weekly deduction is set annually at a standard rate, which is higher for claimants admitting or found guilty of fraud.

The maximum deductions in 2023/24 is:[23]

• £21.25 where the overpayment resulted from fraud

• £12.75 in any other case

The total deduction can then be increased by up to 50% of:

• any £5, £10, £20 or £25 earned income disregard

• the amount of the employment and support allowance permitted work earning where the weekly limit is £20

• any disregard of regular charitable or voluntary payments (such as payments from family, friends or charities)

• the £10 disregard of war disablement or bereavement pension

A claimant for whom the weekly deductions would cause financial hardship can usually negotiate a lower rate of deductions.

If the claimant has moved home, the local authority can recover an overpayment related to the claimant's previous home through deductions from their housing benefit entitlement in relation to the new home:

• when the housing benefit has been payable to the same person at both addresses (whether the claimant or landlord/agent), and

• the overpayment arose as a consequence of payments being made on a property in which the claimant was no longer residing[24]

An overpayment is usually  recovered from the person to whom it was paid.

However, in certain circumstances, an overpayment can be recovered from someone else.

Claimant and partner

If the overpayment was made to the claimant, it can be recovered from the claimant or from their partner provided that they were a couple both at the time of the overpayment and when the deduction is made.[25]

The overpayment can be recovered from the claimant's housing benefit, or other prescribed benefits, at the rate set out above.[26]

An overpayment can be recovered by an attachment of the claimant's earnings.[27] Regulations set out the rate at which deductions can be made.[28]

Landlord

If the overpayment was made to the claimant's landlord or the landlord's agent, it can be recovered from the claimant, the landlord, or agent of the landlord, depending on the circumstances.[29]

Recovery from the landlord or the landlord's agent may be through sending the landlord a bill, or deductions from future payments of housing benefit or other benefits, or deductions from payments made to that landlord in respect of other tenants. The last case is often referred to as 'recovery by schedule' or 'recovery from a blameless tenant' and the landlord must make sure they adjust their accounts so that the 'blameless tenant' is not affected by the recovery.[30]

Where a local authority seeks to recover an overpayment from a landlord, the landlord can appeal to dispute whether the tenant was indeed overpaid, even though the tenant did not dispute the same point in earlier proceedings between the tenant and the local authority.[31]

Where an overpayment is recovered from the landlord, the landlord could then claim the recovered sum from the claimant.

Other person

If someone else caused the overpayment (eg they were responsible for the relevant misinformation), it can be recovered from them instead.[32]

Misrepresentation/non-disclosure

Where the overpayment arose as the result of a misrepresentation of or a failure to disclose a material fact, the overpayment can only be recovered from the person who misrepresented or failed to disclose the material fact.[33]

Court action

Where the local authority cannot recover the overpayment using the methods outlined above and has not been able to agree repayments with the claimant, it can apply to the county court on form N322A for enforcement.

When the local authority has decided to recover an overpayment, it must inform the claimant in writing (or the person from whom the payment is to be recovered) within 14 days.[34]

The notification must state:[35]

• the overpayment that is legally recoverable and why

• the amount of the overpayment, how this was calculated and the period to which it relates; how and from whom recovery will be made

• that the claimant or the person from whom the overpayment is to be recovered has the right to request a review of the overpayment decision or to make an appeal to the tribunal

In one case it was held that where an applicant had lodged an appeal in the First-tier tribunal against an overpayment decision, the authority’s response should have included copies of all documents relevant to the case, including a statement explaining how the overpayment had been calculated.[36]

Where an overpayment is found to be the result of fraudulence in relation to the claim, the claimant could face a criminal prosecution if the offence is considered to be sufficiently serious. It is a criminal offence to make false or dishonest representations in order to claim housing benefit. Criminal law sanctions include fines or, in the most serious cases, imprisonment.

Where an overpayment results from carelessness or negligence, either on the part of the claimant or by someone else acting on the claimant's behalf, the claimant may be given a civil penalty.

Administrative penalty as an alternative to prosecution

The DWP may offer the claimant the option of paying an administrative penalty instead of bringing a prosecution where the claimant's act or omission has caused a recoverable overpayment and the DWP is satisfied that there are grounds for prosecuting the claimant.[37]

The offer of an administrative penalty must be made in writing and must give the claimant 14 days to change their mind. The claimant should be informed that their benefit may be subject to a sanction even if an administrative penalty is accepted.

For offences that were committed on or after 8 May 2012, the penalty is 50 per cent of the overpayment, subject to a statutory minimum and maximum amount. For offences committed partly or wholly before 8 May 2012, the penalty is 30 per cent of the overpayment.

The penalty is added to the overpayment and recovered in the same way as the overpayment. The claimant may choose to opt for prosecution instead of accepting an administrative penalty. If the claimant successfully requests a reconsideration or appeals against the decision, the penalty is repaid.

Civil penalties

A fixed civil penalty for a claimant's error can be imposed by a local authority when an overpayment of housing benefit has been made.[38]

A civil penalty cannot be issued where the claimant has been offered an administrative penalty or is being prosecuted for the offence.

It will be added to, and recovered along with and by the same means as, the overpayment. An appeal against the civil penalty is made by appealing against the amount of the overpayment. There is a right of appeal against the imposition of a civil penalty.

The penalty only applies to claimants who:

• negligently made an incorrect statement or representation, or negligently gave incorrect information or evidence in connection with a claim without taking reasonable steps to correct it

• failed, without reasonable excuse, to provide information or evidence about a claim when requested

• failed, without reasonable excuse, to notify a relevant change of circumstances