UC, SEISS payments and automatic reclaims

Introduction

The coronavirus pandemic and the lockdown measures have drastically affected income for the employed and the self-employed. As a result, the government introduced schemes to help employers retain their employees/staff and provide interim replacement income for both the employed and self-employed during this difficult time.

The Coronavirus Job Retention Scheme (CRJS) was introduced for employers to claim their employees or workers furloughed pay, and the Self-Employed Income Support Scheme (SEISS) was introduced to assist the eligible self-employed with the sudden loss of profits.

Amendment regulations (The Universal Credit (Coronavirus) (Self-Employed Claimants and Reclaims) (Amendment) Regulations 2020) No.522 (the ‘Amendment Regs’) came into force on 21 May 2020.

The regulations ensure that a self-employed UC claimant who is also an employer and who receives payment under the CJRS scheme (ie, for her/his employees) does not have that money treated as her/his own income or capital. They also make wider provision about the treatment of SEISS income and reclaiming UC after having excess income (for all claimants, not just the self-employed).

How does UC deal with SEISS income?

Regulation 2(1)(a) of the Amendment Regs provides how SEISS income should be treated, together with regulation 57 (self-employed earnings) of the Universal Credit Regulations 2013 (the ‘UC Regs 2013’). SEISS income is to be treated as ‘earned income’ received at Step 1 of the calculation of self-employed earnings in the assessment period in which it is received.

SEISS payments have only been paid since May 2020. Therefore, those eligible for the SEISS and awaiting payment have likely claimed UC in the interim period to assist with the sudden loss of income.

Regulation 2(1)(a) also provides that the SEISS income will be treated as income in the assessment period in which it is received, which means that self-employed UC claimants will not encounter overpayments for the periods they received UC, when they re-ceive their SEISS payments.

Regulation 2(2) provides that any payment to a self-employed claimant that is a grant or loan to cover expenses or the loss of trade due to the coronavirus outbreak is also to be disregarded for 12 months from the date it is received. This clarifies how payments received under the CRJS or the new loans and grants introduced – such as the Small Business Grant Fund, Retail Hospitality and Leisure Grant and Bounce Back Loan Scheme – will be treated for UC purposes.

Reclaiming UC

Regulation 3 of the Amendment Regs amends the Universal Credit, Personal Independence Payment, Jobseeker’s Allowance and Employment and Support Allowance (Claims and Payments) Regulations 2013 No.380 and inserts a new regulation 32A:

‘Reclaims of universal credit after nil award due to earnings
32A.—(1) This regulation applies where— (a) a claim is made for universal credit, but no award is made because the condition in section 5(1)(b) or 5(2)(b) of the 2012 Act (condition that the claimant’s income, or joint claimants’ combined income is such that the amount payable would not be less than the prescribed minimum) is not met; or (b) entitlement to an award of universal credit ceases because that condition is not met. 

(2) The Secretary of State may, subject to any conditions the Secretary of State considers appropriate, treat the claimant (or joint claimants) as making a claim on the first day of each subsequent month, up to a maximum of 5, that would have been an assessment period if an award had been made or, as the case may be, if the award had continued.’

In practice, this amendment means that where a UC claim is not awarded or has terminated due to excess income (‘the old claim/award’), then for the next five assessment periods immediately following, a claimant may be treated as making a new UC claim without having actually made one.

The advantages for claimants here is that where previously UC claims ended due to excess income and/or the surplus earnings rule applied,1 UC claims would terminate due to excess income and the claimant would have to reclaim within six months for any surplus income to start to deplete.

The automatic reclaim for five assessment periods that follow the ‘old claim/award’ means that any surplus income can start to deplete from the next assessment period that follows and any entitlement to UC arising from reduced income can be made sooner. Note, however, that if the surplus earnings rule is engaged, that will continue to apply to the automatic reclaim.

Any excess income will do…

The explanatory memorandum to the Amendment Regs2 states that the purpose of the regulations is to clarify how the SEISS and CRJS income is to be treated in the case of self-employed UC claimants. It says that regulation3 (ie, automatic reclaims) is intended to apply only with reference to excess income following payment from the SEISS and CRJS schemes.

However, regulation 3 in fact affects all claimants whose UC claim ends due to excess income, regardless of whether they received income from the SEISS or CRJS. The regulations use the words ‘earnings’ and ‘income’, and do not specify that this income needs to be SEISS or CRJS income.

Official guidance indicates that automatic reclaims will apply in any excess income case. ADM Memo 10/203 provides examples of how the regulations will be enforced in practice to UC claims that ended due to excess income and again no reference is made to the effect that the income must derive from SEISS or CRJS payments.

A further disparity between the regulations, explanatory memorandum and the ADM Memo 10/20 concerns whether UC claims/awards that ended due to excess income before the Amendment Regs came into force on 21 May 2020 would be covered.

The official guidance says that such claims/awards are covered. ADM Memo 10/20 provides examples of how UC claims that ended due to excess income before 21 May 2020 will also be subject to the automatic reclaims for five assessment periods that follow. However, there is no specific mention of this in either the Amendment Regs themselves or the explanatory memorandum.

Following from the specific wording in the regulations and the DWP guidance, advice to claimants would be that any claim that ended due to excess income should be covered by these amendments and the automatic reclaims for up to five assessment periods they provide for.