1. Introduction
It is important to ensure that a client’s income is raised, if possible, by checking that:
•s/he receives all the benefits and tax credits to which s/he is entitled, and that s/he is paid the correct amount;
•her/his tax liability is as low as possible;
•all possible sources of income have been explored.
Maximising income increases the amount of money coming in and minimises the expenditure going out. Checking that clients are receiving all the benefits to which they are entitled is a good starting point.1Money and Pensions Service, Income Maximisation Guidance, September 2018 If you are not a welfare rights specialist, you should consider consulting with colleagues who are, signposting the client to a website considered appropriate by your agency or referring cases to someone who is able to undertake this work.
The debt adviser’s approach to income maximisation must be systematic in order to be comprehensive. You must have a working knowledge of the benefits and tax credits system and the books on income maximisation listed in Appendix 2. Materials and tools are also available on the Money & Pensions Service website at debtquality.org.uk. This chapter assumes general advice knowledge, but cannot explain all the ways in which income can be maximised. Instead, it describes some common ways of increasing income for people in debt. The rules of entitlement to benefits are in detailed regulations. Many terms are not described fully here and if you are unfamiliar with them, you should consult CPAG’s Welfare Benefits and Tax Credits Handbook, which is fully referenced to the law, including caselaw.
The criteria for entitlement are strict and must be met. In particular, these include the following.
•Claims. Most benefits and tax credits must be claimed, either online, on a paper form or by making a telephone claim to the Department for Work and Pensions (DWP) or HM Revenue and Customs (HMRC). Satisfying the rules of entitlement is not enough; if a claim is not made for a benefit, the client cannot receive it.
•Time limits. There are strict time limits for claiming all benefits. A claim must be made within the time limit, otherwise the client will lose money to which s/he would otherwise be entitled. Some benefits can be backdated, but the rules vary and some important basic benefits, like universal credit (UC) and income-based jobseeker’s allowance (JSA), are difficult to backdate.
•Appeals. There is a right to appeal most decisions, including whether or not to award benefit. Clients must usually apply for a decision to be reconsidered before they can appeal (known as a ‘mandatory reconsideration’). Appeals must be made in writing and within strict time limits, usually one month. Errors by the DWPand HMRC in awarding and calculating benefits and tax credits are common, but if the client does not appeal an incorrect decision, s/he may find s/he loses out. Decisions about whether there has been an overpayment and, in some cases, whether it can be recovered can also be appealed.
•Residence and immigration tests. Most benefits have residence, presence and immigration tests. A client who is a ’person subject to immigration control’, sponsored, or an asylum seeker has limited access to most of the benefits in this chapter. Specialist immigration advice should always be obtained for such clients. In addition, most means-tested benefits have residence tests. These mainly affect European Union nationals.
•Changes in circumstances. A client must notify the authority that pays her/him benefits about any changes of circumstances that might affect her/his entitlement or the amount – eg, if s/he is claiming a benefit on the basis of being out of work and then gets a job. If s/he does not do so, she may have been overpaid and the overpayment may be recoverable. Under UC, all overpayments are recoverable.
The benefits system is complex, and there are many ways of categorising benefits. It can be helpful to think of benefits as falling into three types.
•Earnings-replacement benefits – eg, contribution-based JSA, contributory employment and support allowance (ESA) and retirement pension. Typically, these are based on national insurance contributions and are not means tested. If a client has worked or been self-employed in the past, s/he may qualify for a contribution-based earnings-replacement benefit.
•Benefits that depend on a person’s circumstances – eg, personal independence payment and child benefit. These are paid because the client has certain needs or falls into a certain category – eg, s/he has a disability or a child.
•Means-tested benefits or tax credits – eg, UC, income support, income-related ESA, income-based JSA, pension credit (PC) and housing benefit. These top up a client’s benefit and/or other income to a certain level, sometimes referred to as the ‘safety net’. Which means-tested benefits a client can claim depends on her/his circumstances – eg, a client over pension age can claim PC and a client looking for work can claim UC or JSA.