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Housing Benefit Subsidy - Audit Commentaries

On this web page we consider those occasional areas where members of the external audit team (usually Audit Commission staff) appear to be in conflict with the local authority staff dealing with the day to day management of Housing and Council Tax benefit. Fortunately this is very rare. Even when conflict does occur, they are good rational arguments on both sides for the differences.

Here we outline the circumstances that can generate a conflict, the risks associated with certain approaches to its evaluation and suggest ways of resolving any potential conflict.

Regulated Tenancies - No Rent Officer Determination Required

Different regulations apply to the determination of Housing Benefit for private tenants depending on whether the start date of a tenancy began

• before 15 January 1989 - regulated tenancies
• from 15 January 1989  - de-regulated tenancies - both 'old' and 'new' scheme

Under the current rules (September 2007), the main difference is that for all de-regulated tenancies the rent has to be submitted to the Rent Officer for determination each year, whereas regulated tenancies are exempt from this requirement. This difference will continue to be important following the introduction of the Local Housing Allowance (LHA), because private tenants under regulated tenancies will not be transferred on to the new rules.

The determination of where a tenancy start date falls is therefore important. The Housing Benefit Regulations 2006 state

The problem occurs when deciding what sort of evidence is necessary to determine where the start date falls for the purpose of satisfying the regulations.

A good source of information is usually the "Tenancy Agreement" between the tenant and his landlord. However, eligibility for housing benefit is NOT dependent on the existence of a formal written agreement. The regulations do not specifically state that a claimant needs to prove the start of his tenancy by reference to a "Tenancy Agreement". In common with most legislation, if there is no specific requirement the regulations do not refer to it. The best way to show that this interpretation is correct is by reference to the Housing and Council Tax Guidance Manual.

The consequence of this is that a local authority may not retain the evidence to show exactly when a tenancy began, nor is it statutorily required to do so. This sounds like a non sequitur. How can you show that the legislation has been complied with unless you know the exact date? We will need to walk carefully through both the legal and practical implications of the regulations so show what is needed.

The legal requirement is to show that the tenancy started on a date (any date) before 15 January 1989 in England and Wales (2 January 1989 in Scotland).

In practice the software packages could take one of two approaches to evaluating the requirement. It could ask an input processor to

• set a flag stating whether the tenancy started before 15 January 1989 (thereby defining whether or not this was a regulated tenancy), or
• set a date when the tenancy began and allow this package to determine whether the tenancy was regulated or not.

Both approaches are subject to human error, but the second approach allows for the errors to be quite significant and still not undermine the correct interpretation of the regulations. Provided the date posted in the second approach falls correctly before (or after) the relevant cut off date the legal interpretation will be correct, whereas any errors in the first approach will be absolute. All packages reviewed by ACBA (UK) LTD have adopted the second approach.

In either case a local authority will need to verify the accuracy of its database for any claimant/property combination. In the absence of a formal tenancy agreement the authority might use the following

• show that the tenant has been claiming benefit from the same property since before January 1989
• show that the tenant has been paying Council Tax on the same property since before January 1989
• ask the tenant (or landlord) to confirm the start date of the tenancy

Any one of these approaches should provide sufficient evidence of compliance with the regulations even though absolute accuracy cannot be guaranteed.

De-regulated Tenancies - 'New' and 'Old' Scheme

The Housing Benefit and Council Tax Benefit (Consequential Provisions) Regulations 2006 state

In practice this means that a tenant who was first entitled to benefit on his/her current property before the 1 January 1966 is entitled to certain protection under Regulation 12 and 13 of the Housing Benefits Regulations - 'old' scheme cases. For subsidy purposes these tenancies need to be reported under separate cells from those cases first determined after that date - 'new' scheme cases.

There is no direct connection between this requirement and the start date of tenancy, but, for any reviewer, the first and most easily answered question is whether or not the tenancy began before 1 January 1966. For most reviewers and auditors this is the natural starting point for any investigation, but it does not by itself meet the requirement of the regulations.

The evidence in support of whether or not a claim should be reported as 'new' or 'old' scheme depends entirely on

• when it was first determined for the purposes of Housing Benefit, and
• the unbroken continuation of that claim (subject to permissible breaks) to the current claim at the same property

The reviewer would not, in most cases, need corroborative evidence outside the Housing benefits software package to prove the validity of the database.

Under the expected provisions of the LHA, all de-regulated tenancies will transfer to the new rules. The distinction between 'new' and 'old' scheme will no longer be relevant.

"Tenancy Agreements"

It has been suggested by some external audit reviewers that the presence of a "Tenancy Agreement" within the supporting documentation to a claim is vital. Such a document is often very useful, but it is not a mandatory requirement of the Regulations and may not always be present. Indeed any claimant refused benefit solely on the grounds of failure to supply a Tenancy Agreement would have an appeal against the local authority upheld.

DWP Advice and Publications on HB/CTB and associated Subsidy

The primary authoritative source for all matters relating to Housing and Council Tax Benefit is the Department of Work and Pensions (DWP) itself. The DWP web site provides access to all their formal publications and advisory literature. Your starting point should be the Housing Benefit and Council Tax Benefit Good Practice Guide. This web page provides links to the "HB/CTB Guidance Manual", "HB/CTB Overpayments Guide" and the "HB/CTB Subsidy Guidance Manual".