Just because a person claims a particular benefit, should not mean they are disallowed from standing as a Councillor. Incapacity Benefit can be claimed as well as any allowance depending on the amount of any allowance. It is always advisable to inform the Incapacity Benefit Office of your position once you are elected. If your Council pays an allowance, it may affect how much of your Incapacity Benefit you are allowed to keep.
Also bear in mind that the Government are doing away with Incapacity Benefit in time.