Financial eligibility guidance

1. Introduction
2. How are the means assessed?
3. Does the client qualify financially?
4. General Principles of Assessment
5. Assessing Gross Income
6. Assessing Disposable income - Allowances against income
7. Assessing Disposable Capital
8. Intentional deprivation of resources
9. Eligibility of children
10. Mistakes in assessment
11. Changes in circumstances

Volume 2F (Financial Eligibility) of LSC Manual

Page 2F-001

Part F Financial Eligibility

1. Introduction

1.1 General

Non Contributory

1. (a) Legal Help
   (b) Help at Court
   (c) Legal Representation before the Asylum and Immigration Tribunal and Legal Representation before the High Court in respect of an application under section 103A of the Nationality, Immigration and Asylum Act 2002
   (d) Family Mediation
   (e) Help with Mediation
2. Contributory
   (f) Legal Representation in Specified Family Proceedings i.e. family proceedings before a Magistrates' Court other than proceedings under the Children Act 1989 or Part IV of the Family Law Act 1996

Legal Representation in Specified Family Proceedings i.e. family proceedings before a Magistrates' Court other than proceedings under the Children Act 1989 or Part IV of the Family Law Act 1996.

Legal Representation other than the categories above is not covered in this guidance as the Commission is the assessing authority in such cases. A copy of the key guidance provided to the commission's assessment offices is provided in Volume 3 Part D of this manual.

2. The financial limits and method of assessment for the various levels of service are fixed in the Community Legal Service (Financial) Regulations 2000. Those regulations have been substantially amended under the Community Legal Service (Financial) (Amendment No.3) Regulations 2001.

References to regulations in this guidance are references to those amended regulations unless otherwise stated. This guidance constitutes the Commission's guidance in accordance with Regulation 9 of the Community Legal Service (Financial) Regulations 2000.

Page 2F-002

2. How are the means assessed?

2.1 General

1. The basis of means assessment is the same across all levels of service for which the supplier is the assessing authority. There are both income and capital limits  for each  level of service . These limits are set out in Regulation 5 and are summarised below (see paragraph 2F-003).

2. Under Regulation 3 some cases are exempt from the requirement to assess the client's means, these are:

1. Services consisting exclusively of the provision of general information about the law and legal system and availability of legal services
2. Initial legal advice consisting of such amount of Legal Help and Help at Court authorised under contract to be provided without reference to the client's financial resources. It should be noted that of the general civil contracts, only the Not for Profit sector version contains such authority.
3. Legal Representation in Special Children Act and related proceedings
4. Legal Representation in proceedings before a Mental Health Review Tribunal under the Mental Health Act 1983, where the client's case or application to the tribunal is, or is to be, the subject of the proceedings
5. Legal Representation for applications pursuant to sections 3(2) or 14(2) of the Child Abduction and Custody Act 1985 and for the registration of or the refusal to register a foreign maintenance order or the registration of a judgement
6. Such services as are funded through grants under section 6(3)(c) of the Act unless the conditions of grant state otherwise

3. The provider of the service has, as a first step, to determine the client's financial eligibility on information provided by the client. This should be done on the requisite form provided by the Commission.

4. The forms must be completed in full and sufficient information held on file to allow the assessment to be checked if necessary. See also General Civil Contract Rule 2.5.

5. Reasonable steps, for instance requesting sight of a pay slip, must be taken to verify the information provided by the client. It is good practice to emphasise to clients the importance of giving a full and fair picture when they are applying for funding. See General Civil Contract Rule 2.5 for the detailed requirements as to evidence.

2F-003

3. Does the client qualify financially?

3.1 General

1. For all levels of service the client's gross income must be £2350 per month or less; for clients with more than 4 dependant children a higher gross income limit applies (see below). If the client's gross income exceeds this level then they are ineligible for assistance and the application should be refused.

This makes eligibility far more transparent than under previous regulations. A client who is directly or indirectly in receipt of Income Support, Income Based Jobseeker's allowance or Guarantee State Pension Credit (under section 1(3)(a) of the State Pension Credit Act 2002(a) automatically satisfies the gross income test for all levels of service.  If the client is directly or indirectly in receipt of payments under Section 95 of the Immigration and Asylum Act 1999 - i.e. NASS support - they qualify automatically on income for the following levels of service for asylum and immigration matters: Legal Help and Legal Representation before a) the Asylum and Immigration Tribunal; and b) the High Court in respect of an application under section 103A of the Nationality, Immigration and Asylum Act 2002 (i.e. Controlled Legal Representation). 

Gross income for this purpose means the total income from all sources before the deduction of tax, National Insurance or any other allowances or disregards. This gross income cap acts as a filter and a client whose gross income is below the relevant cap must then have their disposable income and disposable capital assessed in order to determine eligibility.

2. The relevant gross income cap can be ascertained by reference to the table below.

For the purpose of the new gross income cap a dependant child is defined as anyone for whom the client and/or their partner (if client and partner's resources are being aggregated) receives child Benefit.

3. Both disposable income and disposable capital must be within the eligibility limits in force at the time the application form is signed. Disposable income and capital refer to the income and capital after prescribed allowances and disregards have been applied. If either disposable income or disposable capital are above the limits, the client will not be eligible for funding and the application must be refused.

However, as from 11 April 2005 there are special rules relating to Legal Representation in relation to Domestic Violence cases i.e. proceedings where an injunction or other other for protection from harm to the person is sought; or committal for breach of any such order.

The eligibility limit for disposable income can be waived in such cases but the Gross Income Cap of £2350 per month will still apply. Any contribution from income or capital which is applicable under the regulations cannot be waived in such cases; contributions will apply to all assessed disposable income above £275 per month i.e. contributions are not limited to disposable income up to £649 per month.

4. A client who is directly or indirectly in receipt of Income Support, Income Based Jobseeker's allowance or Guarantee State Pension Credit automatically satisfies the disposable income and disposable capital test for all levels of service.  A client who is directly or indirectly in receipt of payments under Section 95 of the Immigration and Asylum Act 1999 - i.e. NASS support - will automatically be financially eligible for the following levels of service for asylum and immigration matters: Legal Help and Controlled Legal Representation.

5. The relevant limits for disposable income and capital are set out below for each level of service.

6. For Legal Representation in Specified Family Proceedings the upper capital limit may be exceeded if the costs incurred under the certificate are likely to exceed £5000. Such cases must be referred to the Commission for authorisation prior to the granting of funding.

7. Clients who are/were funded for Family Mediation automatically qualify financially for Help with Mediation in respect of that mediation. Clients who are seeking Help with Mediation but who did not receive funding for Family Mediation should have their financial eligibility assessed by the applying solicitor in accordance with the eligibility rules for Family Mediation outlined above and the guidance which follows. There are no contributions with Help with Mediation. The applying solicitor will confirm financial eligibility when submitting the application to the Commission who will decide whether funding for Help with Mediation should be approved.

8. For Legal Help, Help at Court, Controlled Legal Representation, Family Mediation, and Help with Mediation provided both disposable income and disposable capital are within the limits no contribution can be called for.

9. For Representation in Specified Family Proceedings a client may have to pay a contribution from income or capital or both as set out below.

3.2 Calculating contributions for Legal Representation in Specified Family Proceedings

1. The only level of service assessed by the supplier for which contributions can be sought is Legal Representation in Specified Family Proceedings. However provided that the client's gross income is below the prescribed limit (set out in section 3 paragraph 1 above) then clients with a disposable income of £279 or below per month will not need to pay any contributions from income but may still have to pay a contribution from capital.

2. A client with disposable income in excess of £279 and up to £649 per month will be liable to pay a monthly contribution of a proportion of the excess over £275. Such contributions will be assessed in accordance with the following bands depending on the level of the assessed income.

*disposable income limit may be waived in Domestic Violence Cases (Legal Representation)

So if disposable income is £315 per month, the contribution will be in band A, the excess income is £40 and therefore the monthly contribution will be £10 per month.

If the disposable income was £426 per month, the contribution would be in band B, the excess income would be £15 (£426 -£411), and the monthly contribution would therefore be £39, i.e. £34 + £5.

If the disposable income was £565 per month, the contribution would be in band C, the excess income would be £20 (£565 -£545), and the monthly contribution would therefore be £88.70, i.e. £78.70 + £10.

3. A client whose disposable capital exceeds £3000 is required to pay a contribution of either the capital exceeding that sum or the likely maximum costs of the funded service whichever is the lesser.

4. Contributions should be calculated by the supplier at the beginning of the case. Such contributions are due from the date that funding is approved until either the proceedings are concluded or funding is withdrawn. The supplier and client may agree on the most convenient method for making contribution payments.

The supplier should bill the Commission for the net cost of the work undertaken in accordance with General Civil Contract Specification Rule 6.2. This will be the amount of the costs less the amount of contribution due from the client (whether or not paid) and the amount of the statutory charge (if any).

5. There are no powers to re-assess the contribution due to a change in the client's financial circumstances but an assessment can be amended where an error in the original assessment occurred or new information comes to light which is relevant to the assessment (see also sections 10 and 11 below).

The position is different for other Legal Representation where the Commission is the assessing authority where there remains the power to reassess eligibility and contributions where a client's circumstances change (see also Volume 3 Part D).

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4. General Principles of Assessment

4.1 Period of Calculation

1. The period of calculation when determining income is the calendar month up to and including the date of the application for funding.

For example, if the application is made on December 8 then the period of calculation will commence on November 9. In practical terms when income/allowances do not vary month on month then the relative amounts can be taken by reference to the most recent month's or week's payments, e.g. the most recent monthly wage.

4.2 Aggregation of Means

1. Regulation 11 contains a general provision that the income and capital of the client's partner must be taken into account and added to those of the client. Partner is defined as anyone (including a person of the same sex) with whom the applicant lives as a couple, and includes a person with whom the person concerned is not living but from whom he is not living separate and apart.

2. This means that just because the client and their partner are physically separated i.e. they live in separate properties, does not necessarily mean that they are living separate and apart for the purpose of the regulations. The fact that both terms are used (i.e. "separate" and "apart") means that more than mere physical separation is required if the partner's means are not to be aggregated.

Living separate and apart is well defined in the context of matrimonial law and refers to a breakdown in the relationship. In other words, the parties must be living separate and apart because at least one of them regards the relationship as at an end and not due purely to financial or practical reasons e.g. job location or the fact that one of the parties is in prison, hospital, residential care etc. (see also guidance volume 2 Part A section 14 para MH2.5 in the case of Mental Health category cases).

In many asylum cases there may be occasions where the client is physically separated from their partner due to the partner still being abroad, but the relationship is still intact. In such cases the normal rules of aggregation still apply and the client and their partner will still be treated as a couple for aggregation purposes. However in such cases it may be necessary to consider whether the assets and income of the partner, together with any of the client's assets that have been left behind, are currently truly "disposable" as far as the client is currently concerned.

In such cases the supplier should make reasonable enquiries of the client to determine to what extent that income and those assets are available. If it is decided in an individual case that the partner's income and assets are not available to the client and therefore excluded from the assessment then it would not be appropriate to make any dependant's allowance for the partner (see section 6 below).

3. Further in general the term separate and apart refers to physical separation i.e. the parties are living in separate properties. However, this may not always be the case. It is possible for former partners to live separate and apart in the same household. This would be the case if they regarded their relationship as at an end but remained living in the same property simply waiting for the property to be sold before going their separate ways.

4. In addition for unmarried couples, although not conclusive it would be usual for there to be some evidence of a pooling of financial resources and they must regard themselves as a couple. It would not be appropriate to aggregate the resources of say a brother and sister, or flatmates who are not living as a couple.

Further evidence of living as a couple may include joint care of a child of the couple. Issues may arise where a couple are married according to English law but have not undergone their traditional cultural ceremony and thus are not and never have been actually living together. In the eyes of each other and their family and community they are not yet married. In such cases it would be appropriate to treat them as though they were not married and therefore not to aggregate the resources in the assessment.

5. However, there is an important exception to this rule and means are not aggregated where the partner has a contrary interest in the matter in respect of which the client is seeking funding.

Contrary interest in the most obvious sense will mean that the partner is the opponent or potential opponent in proceedings. However, this will not necessarily be the case - the client and their partner could in theory have a contrary interest in a claim made by a third party, such as in the case of a mortgagee seeking possession where undue influence by the partner may be a defence.

In disputes between divorcing or separating couples, whether as to children or property, one partner will by definition have a contrary interest to the other. However, if a client has left his or her spouse and has gone to live with a new partner as a couple in the same household, then the means of the new partner should be aggregated with those of the applicant.

2F-005

5. Assessing Gross Income 

5.1 General

1. If the client is directly or indirectly in receipt of income support, income-based Jobseeker's Allowance or guarantee state pension credit (under section 1(3)(a) of the State Pension Credit Act 2002(a), they qualify automatically on income (by virtue of Regulation 4(2) for all levels of service.  If the client is directly or indirectly in receipt of payments under Section 95 of the Immigration and Asylum Act 1999 - i.e. NASS support - they qualify automatically on income for the following levels of service for asylum and immigration matters: Legal Help and Controlled Legal Representation.

The client is therefore passported if their partner is in receipt of one of those benefits and the client is included in the partner's benefit claim.  From 5 December 2005, a same sex couple that is claiming state benefits will be paid as a couple and no longer as two single people, this applies whether or not the couple have a registered civil partnership in accordance with the Civil Partnership Act 2004.  Passporting arrangements will therefore apply to married and cohabiting couples (including couples of the same sex) and civil partners. Where the partner is in receipt of a passported benefit as a single person then the client is not passported for funding purposes.

In such cases the client's means should be assessed and the partner's income support included in the assessment as a source of income for the couple. Working Tax Credit and Child Tax Credits are not passporting benefits. In such cases the client's means should be assessed and the net amount of tax credit received each week included in the assessment as a source of income.

2.  Clients in receipt of the above passporting benefits will also satisfy the disposable income and capital limits for the levels of service specified above.

3. "Income" means the total income from all sources which a person has received or may reasonable expect to receive in respect of the calendar month up to and including the date of the application for funding. In determining gross income all income must be included whether from employment, state benefits or elsewhere, e.g. assistance from friends or relatives.

Any payments made direct to third parties on behalf of the client will count as the client's gross income by virtue of Regulation 11(4)(b) of the Community Legal Service (Financial) Regulations 2000. This could be for example payments made by an ex-partner as maintenance direct to a third party on behalf of the client e.g. ex-partner pays the mortgage on the former matrimonial home direct to the lender.

When determining disposable income the relevant mortgage payment should be allowed against income as a housing cost in accordance with the rules for that particular allowance.

4. To calculate calendar monthly income, multiply by 52 and divide by 12 if payment is weekly and multiply by 13 and divide by 12 if payment is four weekly.

5.2 Erratic Income (including the self employed)

1. Where a client's income is erratic (because of bonuses, commission, nature of employment or payment etc.) they may be ineligible for funding one month, but eligible the next as it is the income a client has received or can reasonably expect to receive in respect of the calendar month prior to the application that is taken into account. Where a client has received an annual bonus in the period of calculation then this should be treated as capital.

2. As long as there is no question of the client having deprived themselves of income (see section 8 below) with a view to qualifying, then there would be nothing to stop them from delaying their application for funding until the next month. In these situations, the client should be made aware of the basis of the assessment and the effect of good/bad months. It will be for the client to decide if they wish to proceed immediately on a private fee paying basis if on the previous month's income they are ineligible.

3. It is important to remember that this situation differs from deprivation of income or capital (see section 8 below). This is not allowed and the resources which have been disposed of must still be taken into account in the assessment.

4. The income that should be taken into account should include any that is due or will become due for the period of calculation. If a client has become entitled to money in the previous month which he has not yet received (e.g. he has earned a commission), then that income too must be included in the assessment.

5. In relation to parental contributions to students or student loans these should be treated as income by taking the annual student loan or contribution obtained by the student and dividing by 12.

6. In the case of a self employed client, it is the level of drawings taken from the business for personal use which will count as the client's income. There are no special deductions for the self-employed. If no drawings have been taken in the last month, or the most recent month's drawings appear low then consideration should be given as to whether the client has done so with a view to deliberately reducing their income for the purpose of qualifying for funding.

In such cases the normal monthly drawings should be established and included in the assessment. If the client states that they have not taken any drawings from the business for their personal use e.g. because it is a new business then enquiries should be made of the client to determine how they have met their day to day living costs during the relevant period. Any income or assistance that has been made available to the client from other sources e.g. assistance from friends or relatives with bills, should be treated as income and included in the assessment.

5.3 "No income" cases

1. Situations may arise, especially in the family/matrimonial context, where a client has not received or become entitled to any direct income at all in the preceding month. This may be so where the client is living separate and apart from their spouse in the same home, with the client not being employed but the spouse still meeting all outgoings.

In some cases particularly where the change occurred during the past month it might not be appropriate to base the assessment on the income received for the whole of the previous month. In such cases an estimate should be made of what the client is likely to receive in the next calendar month based on the income received since the change took place.

In these circumstances the client can be assessed as having no income. If, however, the client is receiving money from the partner, or a friend to pay bills or as maintenance, this must be shown as income.

5.4 Disregarded Income

1. Certain state benefits are disregarded when determining gross income or disposable income. The disregarded benefits are:
(a) The following payments under the Social Security Contributions and Benefits Act 1992 namely

1. Disability living allowance;
2. Attendance allowance paid under Section 64 or Schedule 8 of the Act;
3. Constant attendance allowance paid under Section 104 as an increase to disability pension;
4. Invalid Care Allowance;
5. Council Tax benefit;
6. Housing Benefit;
7. Any payment made out of the social fund.

2F-006

6. Assessing Disposable income - Allowances against income

(Figures are monthly unless otherwise stated.)

6.1 Dependants' allowances

1. In determining the disposable income the following deductions can be made in respect of the client's dependants:

£141.87 is allowed against income if the applicant has a partner. Note this allowance applies provided the couple are living together, regardless of whether there is a contrary interest but a couple should not be treated as living together if they have been treated as living separate and apart for aggregation purposes.

£198.06 is allowed for each dependent child (including a foster child) or dependent relative of the applicant who is living in the same household and is aged 15 or under.

£198.06 is allowed for each such dependant aged 16 or over.

2. It is the age of the child at the beginning of the period of calculation which determines which rate is appropriate i.e. the age at the start of the calendar month in question. The dependants allowance rates for children aged 15 or under and each such dependant aged 16 or over were equalized for applications made on or after 7 April 2003.

6.2 Tax and National Insurance

1. The following sums should be deducted from total income when calculating the disposable income for the calendar month:

1. Any income tax paid on that income. For the self employed, a notional income tax figure should be based on 1/12 of the client's income tax liability for the preceding year (i.e. of their last income tax bill). If the client either does not have the information (e.g. because they have not submitted any returns), or because no such payments have been assessed yet e.g. new business, then no allowance should be made.
2. Any National Insurance contributions paid or payable on that income under Part I of the Social Security (Contributions) Act 1992. For the self employed, a deduction of £9.10 per month can be made for National Insurance contributions (the class 2 payment). 

6.3 Maintenance paid by the client

1. In calculating disposable income an allowance can be made for Bona fide maintenance payments to a spouse or former spouse, a child or relative, who is not in any such case a member of the household of the client. An allowance can be made whether the payments are being made under a court order, CSA ruling or voluntary agreement. Only payments actually made can be taken into account.

This allowance should be the expenditure incurred during the month of calculation. In theory there are no set limits to the amount that can be allowed under this heading but evidence of payments should be sought where the amount claimed appears unreasonable. Maintenance payments could include simply paying an ex-partner's household bills or mortgage.

6.4 Housing Costs

For clients with no dependants i.e. where no dependants allowances have been made (see section 6 paragraph 2 above) the maximum monthly allowance in this respect will be £545. No excess over the amount can be allowed. Where any dependants allowance(s) have been made then the rent or mortgage repayments can be allowed in full.

The amount to be allowed in the assessment is the monthly rent or mortgage payable. In practical terms it will not be easy to identify separately arrears of mortgage payments, as the client will generally declare these as a single revised monthly mortgage payment. If the client has already come to an arrangement to pay off arrears by increasing their monthly rent or mortgage payment, then, provided those increased payments are actually being paid by the client, that increased rent or mortgage payment can be treated as the monthly rent or mortgage payable in the assessment.

This is different from a situation whereby a client has commenced paying off arrears in order to reduce their disposable income with a view to qualifying for funding. Such a situation would be regarded as intentional deprivation of income and only the normal monthly rent or mortgage payments should be allowed in the assessment in such circumstances. Mortgage repayments include the monthly premiums of any lined life insurance/endowment policies, PEPs, or other instruments which will be used to repay the capital sum borrowed.

Council Tax, water rates, insurance premiums and other associated housing costs are not allowable deductions in the assessment. If there is a clearly identifiable amount relating to water rates included in the rent payable by the client then these should not be included as rent. However it is not necessary for suppliers to routinely seek clarification as to whether or not the rent declared by the client includes a sum for water rates.

2. Where a client indicates they are paying board and lodging then only the amount in respect of accommodation can be allowed. In those cases where informal arrangements exist, for example lodging with a close family member, and the amount in respect of accommodation cannot be specified by the client then it should be assumed that half of the declared board and lodging element is for accommodation, the remainder is assumed to be for food and other incidentals not covered by the regulations.

3. Where the client states expenditure on housing costs which is more than one third of their gross income then documentary evidence (e.g. copy of bank statement, mortgage statement, or rent book) to support the figures stated should be obtained.

6.5 Employment related expenses

1. Where the client or partner is assessed as receiving a wage or salary i.e. not the self employed, a deduction of £45 for work related expenses shall be made in respect of each person so assessed. This is a set figure, and it is therefore unnecessary to obtain details of actual expenses, but see also childminding below.

2. Where a client or their partner is assessed as receiving a wage or salary a deduction can be made in respect of actual monthly expenditure on childminding charges incurred as a result of that person's absence from home by reason of his employment. Unless there are exceptional circumstances e.g. disability of the child, it would only be reasonable to make such a deduction in respect of a dependant child aged 15 or under.

It would also be unreasonable to make such an allowance where one or other of a couple was available to look after that child. Where the client states expenditure on child care which is more than £600 per month for someone working full time i.e. 35 hours per week (or part-time equivalent) then documentary evidence (e.g. copy of bank statement, copy of agreement/contract with childminder) to support the figures stated should be obtained.

3. Where the client or their partner are assessed as receiving income from a trade, business or other gainful occupation, i.e. self-employed, a deduction can be made in respect of actual monthly expenditure on childminding charges incurred as a result of that person's absence from home whilst he is engaged in that trade, business or gainful occupation. Unless there are exceptional circumstances e.g. disability of the child, it would only be reasonable to make such a deduction in respect of a dependant child aged 15 or under.

It would also be unreasonable to make such an allowance where one or other of a couple was available to look after that child. Where the client states expenditure on child care which is more than £600 per month for someone working full time i.e. 35 hours per week (or part-time equivalent) then documentary evidence (e.g. copy of bank statement, copy of agreement/contract with childminder) to support the figures stated should be obtained.

4. Only one deduction shall be made in respect of an assessment of a client whose circumstances fall within the criteria set out above (i.e. client or partner incurring child care costs due to absence from home whilst undertaking employment / self-employment ). The deduction should not be given twice (i.e. to avoid double-counting).

2F-007

7. Assessing Disposable Capital 

7.1 General

1. In the case of Legal Help, Help at Court, Controlled Legal Representation (Immigration), Family Mediation and Legal Representation in Specified Family Proceedings, those in receipt of income support, income-based Jobseeker's Allowance or guarantee state pension credit qualify automatically on capital. These benefits are act as a 'passport' to financial eligibility for all levels of service.  In addition, if the client is directly or indirectly in receipt of payments under Section 95 of the Immigration and Asylum Act 1999 - i.e. NASS support - they qualify automatically on capital for the following levels of service for asylum and immigration matters: Legal Help and Controlled Legal Representation.

2. "Capital" means the amount or value of every resource of a capital nature, including all savings and any other capital assets (other than the exceptions listed below). Capital derived from a bank loan or borrowing facilities should be taken into account. There are special rules about assessing the value of the client's dwelling which are set out below.

3. The only items of capital which are not taken into account are the following:

1. Household furniture and effects (unless of exceptional value);
2. Clothes;
3. Tools and implements of trade;
4. Back to work bonus received under Section 26 of the Jobseekers Act 1995;
5. Payments under the Community Care (Direct Payments) Act 1996;
6. Capital value of the client's business in the case of the self employed;
7. Capital held in trust funds to which the client cannot access;
8. Cars or other vehicles in regular use (unless of exceptional value);
9. Any payment made out of the Independent Living Funds.
   

7.2 The client's share of joint assets when the partner is the opponent or contrary interest exists

1. There will often be assets which are jointly owned by the parties or to which both parties have access. Where assets are held in joint names the assessing authority in its discretion, will normally assume that the asset is owned in equal shares (unless documented evidence of the asset being owned in unequal shares - e,g, 70:30 division etc. - exists and is provided by the client).

However, in deciding what should be taken into account for the client a key question is whether the client has access to or control of the asset. For example, if the client has free access to money in a bank account, then that money should be included in the client's assets.

There is, however, some scope for discretion as to the valuation of the client's interest in the asset. If the client establishes that there is an agreement or understanding about certain assets such as a joint account being split equally, then it would be reasonable only to take into account half the value of the asset.

7.3 Subject matter of the dispute

In respect of an application for Legal Representation in Specified Family Proceedings, the amount disregarded under the subject matter of dispute rule shall not exceed £100 000; where the client's interests in such assets exceeds £100 000 the excess will be included within the assessment.

In calculating the value of the client's interests in any resource of a capital nature which is owned jointly or in common with any other person, the assessing authority in its discretion will normally assume that the asset is owned in equal shares.

2. This situation only applies to capital assets. It is a very important rule in the context of family/matrimonial cases. It means that assets which are being fought over in relation to the dispute for which funding is required must not be taken to account* when assessing capital.

(*exemption limited to £100 000 in respect of an application for Legal Representation in Specified Family Proceedings).

3. In dealing with property assets which are in dispute in respect of an application for Legal Representation in Specified Family Proceedings the following hierarchy of disregards will apply.

Where a client's main or only dwelling in which he resides is the subject matter of dispute:
Step 1(a). Apply the mortgage disregard (actual mortgage or £100 000 whichever is the less) to the value of the property to establish the total amount of equity within the property; 
           (b) Determine the client's share of this equity - generally treated as 50% unless there is evidence of a different division of property. Multiply total equity assessed under Step 1(a) by the client's percentage share of the property.
Step 2. Apply the subject matter of dispute disregard of £100 000 to the client's share of  any equity within the property.
Step 3. Apply the Equity disregard of £100 000 to the remainder (if any) of the client's share of the equity within the main dwelling.

Therefore, the mortgage disregard will be applied before the subject matter of dispute disregard. The equity disregard is applied after the subject matter of dispute disregard to any remaining property equity.

1. Example 1:
   The applicant has a home worth £320 000 and the mortgage is £150 000. 

1. Value of Home: £320 000
2. Deduct mortgage up to maximum allowable: minus £100 000
3. Equity: £220 000
4. Client's share of Equity (assume asset held in equal shares): £110 000

   Is the client's share of the property and savings in dispute - Yes/No? If Yes:  

1. Apply Subject Matter of Dispute disregard: minus  £100 000
2. Remaining Equity: £10 000
3. Apply Equity exemption for main dwelling property:  minus  £100 000
4. Capital assessed: nil   

The client is therefore eligible for funding in this example.

   2.  Example 2:
        The applicant has a home worth £520 000 and the mortgage is £150 000

1. Value of Home: £520,000
2. Deduct mortgage up to maximum allowable: minus £100 000
3. Equity: £420,000
4. Client's share of Equity (assume asset held in equal shares): £210 000 

   Is the client's share of the property and savings in dispute - Yes/No? If Yes:    

1. Apply Subject Matter of Dispute disregard: minus £100 000
2. Remaining Equity: £110 000
3. Apply Equity exemption for main dwelling property: minus £100 000
4. Capital assessed: £10 000

The client is therefore ineligible for funding in this example.

  3.  Example 3:
       The applicant has a home worth £500 000 and the mortgage is £150 000. The client also has full access to a joint savings account, account balance £9 000.     

1. Value of Home: £500 000
2. Deduct mortgage up to maximum allowable: minus £100 000
3. Equity: £400 000
4. Client's share of Equity (assume asset held in equal shares): £200 000
5. Client's savings (from joint account): £9 000

   Is the client's share of the property and savings in dispute - Yes/ No? If Yes:

1. Apply Subject Matter of Dispute disregard: minus £100 000
2. Remaining Equity and Savings: £109 000
3. Apply Equity exemption to property equity only: minus £100 000
4. Capital assessed: £9 000

   The client is therefore ineligible for funding in this example.

Where the client's interest in the main dwelling property and in other capital assets is the subject matter of dispute, the subject matter of dispute exemption (i.e. £100 000 disregard) should be applied to the main dwelling property first; the remainder (if any) should then be applied to the other assets which are in dispute. The total amount disregarded as subject matter of dispute is not to exceed £100 000.

Where the property in dispute is not the client's main dwelling:

Carry out Steps 1 (mortgage disregard) and 2 (subject matter of dispute disregard) above, but do not apply the main dwelling equity disregard (i.e. Step 3) to the client's share of property equity.

4. Sometimes it will be obvious that a particular asset is in dispute between the parties, but in the family/matrimonial context the point is more difficult to determine if parties seek funding at an early stage and there are a range of assets which may or may not be at issue. The general approach should be that an asset should not be treated as the subject matter of the dispute if the other party has made no specific claim against it.

5. If the funding is for services on issues about a child/children, then assets cannot be treated as subject matter of the dispute, even if the parties are litigating or otherwise in dispute over those assets (although the assets may be disregarded under any other appropriate heading.

7.4 Value of property

1. Provided it is not subject matter of the dispute (see section 7.3 above for details), a client's main or only dwelling in which he resides must be taken into account as capital subject to the following rules:

1. The dwelling should be valued at the amount for which it could be sold on the open market;
2. The amount of any mortgage or charge registered on the property must be deducted but the maximum amount that can be deducted for such a mortgage or charge is £100 000; and
3. The first £100 000 of the value of the client's interest after making the above mortgage deduction must be disregarded.

    Example:
    The applicant has a home worth £215 000 and the mortgage is £200 000:

1. Value of home: £215 000
2. Deduct mortgage up to maximum allowable: £100 000
3. Deduct exemption allowance: £100 000
4. Amount to be taken into account in assessing financial eligibility: £15 000

   In this example, the client is ineligible.

2. Where the applicant has more than one property the value of all other properties should be taken into account but the total amount which can be allowed in respect of mortgages and charges on all the properties cannot exceed £100 000. In applying this rule the mortgage for the main dwelling is deducted last. There is no equity disregard for second properties.

Example:
The client has a main dwelling worth £150 000 and a second dwelling worth £100 000. Each has a mortgage of £80 000.

The second property after allowing for the mortgage has a net equity of £20 000. The value of the main dwelling must be taken into account but only £20 000 can be deducted for the mortgage. This is because £80 000 of mortgage has already been taken into account on the second property leaving only £20 000 (of the £100 000 allowable maximum) to be allowed against the main dwelling.

The equity in the main dwelling would therefore be treated as £130 000. The first £100 000 of equity in the main dwelling is disregarded giving equity in that property of £30 000. The total capital would therefore be £50 000.

The client would not be eligible for funding.

7.5 Pensioners' disregard (Regulation 35)

1. These are additional capital disregards on assessments where either the client (or spouse/partner with whom his resources are to be aggregated) is aged 60 years or over at the date of computation and their disposable income is less than £279 per month.

2. The following process is followed:

1. calculate the client's (and spouse's / partner's) disposable income;
2. if the disposable income figure is above £279 per month, the amount of disposable capital is assessed in accordance with the normal regulations;
3. if however, the disposable income figure is £279 per month or less, then the capital held, up to the maximum available for the particular income, is disregarded in accordance with the following table:

Example:
The client is aged 66. Total disposable income excluding interest from capital is £90.

Total disposable capital (after other allowances and disregards) is £73 000.

Deduct the pensioners disregard in accordance with the above table i.e. £70 000.

Disposable capital is therefore £3 000

The client will therefore be eligible for funding.

Please note if both the client and spouse/partner are aged 60 years or over, where an aggregated assessment is to be carried out, only one amount of disregard will apply in respect of that assessment (as set out in the above table) e.g. if aggregated disposable income is £160 per month, one amount of £40,000 should be disregarded.

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8. Intentional deprivation of resources

8.1 General

If it appears that a person applying for funding has directly or indirectly deprived himself or herself of any resources or has converted any part of his resources into resources which are to be left out of account wholly or partly under the regulations, the resources which have been transferred or converted must still be taken into account in the assessment. This will normally mean that such a person will not qualify for funding.

2. Note that this rule applies where it appears to the provider that the person concerned has transferred or deprived himself of assets with the intention of reducing the amount of his gross income, disposable income, or disposable capital, whether for the purpose of becoming eligible or otherwise. Obviously this rule would not apply if the person had lost assets or money without intending to do so.

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9. Eligibility of children 

9.1 General

There is a discretion not to aggregate assets in this way if it appears inequitable to do so, having regard to all the circumstances including the age and resources of the child and any conflict of interest between the child and the carer.

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10. Mistakes in assessment 

10.1 General

1. Sometimes a mistake will be made in assessing a person's financial eligibility or new information will come to light which suggests that an earlier assessment was inaccurate. Where this happens the assessment can and should be re-opened and a new assessment carried out which may mean that a person was never eligible for funding.

If any dishonesty or improper conduct in relation to disclosure of assets is discovered, the details should be reported to the regional office in accordance with The Funding Code Procedures rule 2.6 (see Part B paragraph 2.6 in volume 3 of this manual). In such cases the costs incurred prior to such a discovery will be assessed in accordance with the Commission's externally published costs assessment guidance.

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11. Changes in circumstances

11.1 General

1. Where on an accurate assessment a client is found financially eligible for funding by the supplier there is no subsequent re-assessment of means if the client's circumstances change. For these levels of service there is therefore no duty on the client to report improvements in means, except in relation to any fresh application for funding.

This position is different than that for Legal Representation where the Commission is the assessing authority where there continues to be provision for the Commission to reassess entitlement to Legal Representation at any point during the life of a certificate when a client's means change (see Volume 3 Part D).

2. Where a client is initially ineligible there is nothing to prevent a further application and assessment where a change in circumstances makes him eligible. However, the cover only runs from the date the application form was fully completed and the client was assessed as eligible.

Last updated: 07 April 2006