News article

How backdated Universal Credit ‘Limited capability for work-related activity’ element is treated in a Debt Relief Order

Posted by Natalie Pearson 14/05/20

Shelter’s Specialist Debt Advice Service (SDAS) produce a monthly ebulletin providing industry news, caselaw updates and articles.

Here is an excerpt from their popular 'Enquiry of the Month' article, where SDAS discuss how backdated Universal Credit ‘Limited capability for work-related activity’ element is treated in a Debt Relief Order.

SDAS have seen an increasing number of enquiries where clients have received a back date of Universal Credit (UC) Limited capability for work-related activity (LCWRA) element, usually, during the Debt Relief Order (DRO) moratorium period. SDAS advisers have been querying how lump sums of LCWRA element received would be viewed by the DRO Team.

Duty to report

Firstly, it is worth remembering that the client must report the lump sum received to the DRO Team as soon as reasonably practicable pursuant to s251J(3) of the Insolvency Act 1986.

Transitional payments

Secondly, it is worth checking exactly the nature of the lump sum. If your client was previously on Employment and Support Allowance (ESA) with a Severe Disability Premium (SDP) and had been migrated onto Universal Credit, and as a result of the migration onto UC the client lost out on SDP payments, then the lump sum could be a transitional payment. The DRO Team have confirmed that such a payment could be disregarded as property in the same way as lump sums of premiums for ESA.

UC element lump sums during the moratorium

If the lump sum is not a ‘transitional payment’, the SDAS team have discussed with the DRO Team about how backdated lump sums of Limited Capability for Work (LCW) and Limited Capability for Work Related Activity (LCWRA) elements of UC are likely to be viewed in a DRO. Read more about this confirmation from the DRO team here.

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