HB/CTB overpayment recovery – FAQs
Q. What is meant by an overpayment?
A. Overpayment means any amount which has been paid by way of HB or CTB and to which there was no entitlement under these regulations (whether on the initial decision or as subsequently revised or superseded or further revised or superseded) and includes:
- any amount paid on account under HB Reg 93 or HB SPC Reg 74 which is in excess of entitlement to HB as subsequently decided, or
- any excess CTB which arises because of a reduction in the amount a person is liable to pay in respect of council tax, or the amount of council tax previously set by the relevant authority is capped.
Fraud overpayments, LA official error overpayments, Departmental official error overpayments, Claimant error overpayments, 'Other' overpayments, or any amount of rent allowance paid on account which, for example, is based on the Indicative Rent Level, but is in excess of actual entitlement to HB (HB R 93 or HB SPC R 74).
It does not include:
Technical overpayments, sometimes referred to as paper overpayments i.e. overpaid rebates credited to accounts in advance of entitlement, and un-cashed cheques.
Q. What is meant by ‘amounts recovered'?
A. This is any amount of a recoverable overpayment that is
recovered. Generally speaking, overpayments are recoverable unless they have
resulted from official error, where the claimant or the person to whom the
benefit was paid, could not reasonably have been expected to realise they were
Examples of ‘amounts recovered’ are:
- payments physically received and attributed to the overpayment debt,
- amounts recovered by means of deductions from payments of HB,
- amounts recovered by means of deductions from arrears of HB owed to the tenant,
- actual amounts received through the sale of an outstanding debt to a collection agency,
- full amounts recovered by debt agencies who are acting on behalf of the LA,
- amounts recovered by Debt Management by means of deductions from payments of other benefits,
- excess CTB transferred to the council tax account, which then becomes outstanding council tax.
‘Amounts recovered’ does not include:
Reductions in overpayments due to the calculation of underlying entitlement, overpayments transferred to other accounts of the LA e.g. sundry debtors, Housing Revenue Account, suspense accounts - unless or until a payment is received and attributed to the overpayment debt through these routes, overpayments that have been written off and the full amount of overpayment debt sold to a debt collection agency, only the amount received for the debt should be recorded as recovered.
Q. How many Types of Write offs are there and please explain the difference between them.
A. There are three categories of write offs:
- Non-recoverable Write Offs - these are overpayments that are legally non-recoverable. These overpayments are caused by official error, be it LA or departmental, when the claimant could not reasonably have been expected to realise they were being overpaid. These overpayments cannot be resurrected and recovered at a later date.
- Discretionary Write Offs - these are when the LA uses its discretion and decides not to recover an overpayment (or any outstanding balance) e.g. because of financial hardship, terminal illness, severe medical conditions or it would be uneconomical to recover. Each case must be decided on its own merits. The local authority may decide that it would be uneconomical to recover, for example if the overpayment was for £5.00 and it would cost £10.00 to recover. It would therefore not be cost effective to recover. Normally the local authority would notify the claimant of the overpayment and the fact that they have decided not to recover it. If the claimant is notified of the write off, the overpayment cannot be resurrected and recovered at a latet date.
- Standard Write Offs - these are when the claimant cannot be traced or all methods of recovery have been tried and have been unsuccessful. If the claimant is notified of the write off, the overpayment cannot be resurrected and recovered at a later date. If the claimant is not notified of the write off, which usually happens when the claimant cannot be traced, then the overpayment can be ressurected and recovered at a later date.
Q. How should I account for a standard write off that has been resurrected?
A. If the Standard Write Off is written off and resurrected
in the same financial year, there will not be a problem with the accounting.
The overpayment should be recorded as normal, with no need to account for
the fact that the overpayment has been written off and resurrected in that
If the Standard Write Off is written off in one financial year, but then resurrected in another financial year, it must be accounted for correctly in both years.
- In the year it is written off, it must be recorded in the LA’s total value of HB overpayments written off during the year, and then it will be deducted from the total amount of HB overpayment debt outstanding at the end of the year. The LA will then have the correct amount of HB overpayment debt outstanding at the start of the following year.
- In the year it is resurrected the amount written off will have to be added to the total amount of HB overpayment debt outstanding at the start of the period in which it is resurrected. Any money recovered for that overpayment can then be recorded.
Q. A claimant has disputed an overpayment and the appeal has yet to be heard - can the disputed amount be classed as an overpayment or should it be discounted until a decision has been made?
A. Such overpayments pending appeal should be included as overpayments outstanding.
Q. How should my local authority apply underlying entitlement?
A. Underlying entitlement is a process that should be
applied to all overpayments, where by the gross overpayment must be reduced
by the amount of benefit that the claimant would have been entitled to
had their correct details been known at the time the overpayment occurred.
This should be done when calculating the overpayment, so that the net overpayment is recorded. In performing this calculation, no cash is recovered for the purposes of recovery totals.
Q. If a claimant agrees to a reduction in their rent rebate to pay back an overpayment and then subsequently does not make up the shortfall in their rent, can it still be counted as recovered?
A. Yes. Where an overpayment is transferred to a rent account, it should be kept separate from any rent arrears that may be on that account. An amount should be deducted weekly from the rent rebate to pay off the overpayment and the claimant should then pay the shortfall to make up the full amount of rent each week. If this shortfall is not paid, the amount will become rent arrears and the weekly deduction made should still be treated as recovered for recovery purposes. This unpaid shortfall should not be treated as increasing the amount of overpaid benefit owed.
Customer is overpaid £100 HB. The HB section transfers the overpayment to the rent account, so the account shows £100 overpaid benefit. This should be kept separate from any rent arrears. It should not be recorded as recovered at this stage. The rent section then deducts £9.15 a week to recover the overpayment. This weekly deduction should be treated as recovered, as and when it is taken. If the claimant does not make up the £9.15 shortfall in rent each week, it will become renat arrears.
Q. Should we record LA official error overpayment as outstanding and then record the non-recoverable ones as written off, or should LA official errors that are non-recoverable be excluded from any outstanding debt totals?
A. You should include LA official errors as overpayments outstanding and then record the non- recoverable ones as "written off". You should collect data on all overpayments, not just those that are recoverable. There are now 3 types of "write offs" which can be applied. These are "non-recoverable", "discretionary", and "standard" write offs.