Hi Taz60
All I can say is that if it is " correct " then it is a very punitive system.
I would ask the Sheltered Housing company for advice as their staff should have had training on this issue. I would also phone Citizens Advice Help to Claim as they can liaise directly with UC.
Let me know how you get on.
David
Nothing on this board constitutes legal advice - always consult a professional about specific problems