A recent Upper Tribunal decision on child support dealt with the issue of a non-resident parent diverting part of his income in order to reduce his liability for child support, which is one of the grounds for varying a child support maintenance calculation. After reading the report of the case I thought it might be useful to have a look at the rules on child support variations, at least as they are under the latest (2012) Child Maintenance Scheme.
Just to explain for those who don’t know, child support is calculated by reference to a formula. The formula has changed numerous times since child support was introduced by the Child Support Act 1991, and under the 2012 scheme it is, for the first time, based upon the non-resident parent’s gross income, rather than their net income. I will not go into the details of the formula here, but obviously as it is a formula it will always produce an exact amount of maintenance payable by the non-resident parent – this certainty has always been a feature of the child support system, replacing as it did the uncertainty of the previous court-based system.
The child support system has, however, always had some flexibility built in, acknowledging the fact that no formula can cover every eventuality. This flexibility has been in the form of variations to the maintenance assessment – basically, where there is some particular circumstance that makes that assessment unfair. Either party can request a variation, although the grounds upon which a variation can be made have always been strictly limited.
Variations can obviously be either upwards, on the basis that the non-resident parent can afford to pay more than the maintenance assessment, or downwards, on the basis that they can’t afford to pay the full amount of the assessment. I shall deal with each in turn.
There are essentially two grounds upon which the parent with care of the children may apply for an upward variation of the maintenance assessment:
- That the non-resident parent has unearned income of at least £2,500 from property, savings, investments or certain other sources; or
- That the non-resident parent has diverted their income elsewhere, in order to reduce their income, and therefore reduce the amount of maintenance they have to pay. The diversion can take various forms, for example giving income to someone else or retaining profits within a company, rather than taking a wage.
The non-resident parent may apply for a downward variation of the maintenance assessment on the basis that they have one or more of the following special expenses:
- Certain costs incurred in connection with their contact with their children, for example travel expenses; or
- Extra expenses incurred by them to look after a sick or disabled child; or
- The repayment of certain debts incurred before they separated from the parent with care; or
- Boarding school fees; or
- Payments in respect of certain mortgages, loans or insurance policies.
The amount of these costs must be at least £10 per week for there to be a variation, save in the case of expenses incurred to look after a sick or disabled child.
If you require further details of the above you will find them in Part 5 of The Child Support Maintenance calculation Regulations 2012.
Photo by Philip Brewer via Flickr
Those who have read my various posts on this forum will know I am all for formulas and rules over court-based uncertainty, vagueness and acrimony. That said the formula obviously has to be sensible. Having paid child maintenance for the several years in accordance with a court order, I am now being assessed under the new CMS scheme curtesy of an application by my ex. I suspect she is somewhat miffed as the assessment came out at less than half of what I have been paying to date. It transpires that dividend income is not included, and although the CMS has access to this data from the HRMC, my income assessment was therefore less than half of my actual taxable income. This has nothing whatsoever to do with diverting funds. It simply reflects I am a partner in a business (just like a partner in your average family law firm).
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I am stunned at the incompetence of the Works and Pensions department. The source from which you get your income should (obviously) not matter. The only thing that should matter is (obviously) your total taxable income as reported to the HRMC, from whatever source. Otherwise, we end up with a system in which salary earners pay more than people who get their income from capital even if both have the same overall income.
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Formulas are good as they keep parents away from courts and lawyers and all the financial and emotional damage they create. But they have got to make sense. CMS needs to go back to the drawing board. And it ain’t that difficult to get this right.
Have read Nordic’s comment. Will read the article in a sec.
I do go the other way (courts rather than formulas) on this point Nordic. The only thing that should matter is that the children are well looked after and the parents are ok.
With re to formulas on tax like this one, I suppose they, like voting systems, and courts, are an inexact science. on balance though I would probably go with a case by case Judge based system over a broad based Government approach as I think the later will either encourage divorce by the non resident parent for leaving in some instances where the amount is low, or divorce by the parent with care to get the other person to leave if the amount is too high if you take conduct out you encourage bad behaviour and single parenthood.
To say that money doesn’t influence behaviour as the cms csa cmec underlying rule is is wrong and is against common sense on motivation and everything known about paying people. Somethings I wouldn’t do if I didn’t get paid for it. I think that is something that a lot of women, including my ex, could say about chucking the fathers out. Now I will read the article. I find your postings a lot more interesting though.
I didn’t get far with the article. It is the same issue of the last 25 years of trying to put in a formula for everyone where everyone is different and makes no sense for the reasons I put above and as explained in your example and as why Marilyn Stowe resigned from the CSA, because the rules and formula are too rigid and hard on some people, a rigid formula based approach always will be. Better to let people sort things themselves in or out of court.
I think I managed to read the first paragraph of this article but then got confused and stopped a third to a half way through the second paragraph.
By as explained in your example above I meant as you explained with re to the dividends and exact nature of how it was in your case.
To show I am not sexist, I am sure there are Deadbeat Dad who weigh up the broad brush formula maintenance and think they can afford to go rather than be a hands on good father for no good reason, I am as against them as I am the pwcs who chuck the nrps out. Sorry if I am talking in stereotypes, it is hard not to on this subject and that is the nature of it and my point that should be looked at on case by case base rather than broad brush approach for the best for society and the individuals concerned in each instance.
I would advise pwcs going to csa cmec cms. Actions create reactions and it is better to try and resolve with the father and probably in most cases emotionally and financially better off for you to keep it away from them for you if you are a pwc in my experience, for example nrp can give up work or go abroad etc. which is often the case and not good, not good when parents fight like that, especially not for the children as both parents are half each of each child.
As they say in Jurassic Park, nature finds a way, in this case to not pay. Perhaps employers will pay people in food or something if this nonsense of paying people to leave you and take your children away nonsense continues.
Perhaps everyone will just pay everything into their pensions out of being upset and live in poverty rather than give anything to their ex (I have seen that, not me, I pay), etc. Very sad and bad business this broad based approach. I think things were better before the 1991 CSA introduction as I don’t think it has made society better, indeed, quite the opposite.Being able to get a clean break was possible, especially where ex re-marries. Now you get told it is not. Where there is not enough money to go around the nrp gets the worst of it, maintenance, settlement, tax credits,and that is not fair. As I say, if possible avoid these places, indeed cmoptions say the same and they are the government.
So I suppose I am not so much of an extremist as I thought I was. If possible do a deal with your ex and avoid these places. That especially applies to Pwcs, although it applies to nrps also. I think I also agree with Nordic on that which is a nice way to leave this.
Except to say that, on balance, if there is to be a formula broad based approach I think that the amount should be lower than it is as it encourages single parenthood. I would prefer case by case approach. Wrt no acrimony with the csa cms cmec the person who wrote that in this article is skipping the point that there is a massive amount of acrimony there, as I accept there maybe was before with the courts acrimony, it was probably less so then now.
The broad brush formula based approach we currently have is bad.
The broad brush formula based approach we currently have with the csa cmec cms on this subject of child support in the UK is bad, If Scotland leave the UK they will scrap it because they will have more representative democracy and it isn’t right. Indeed compliance in Scotland, where they are more socially minded is a lot less than the rest of the UK because people there don’t like to comply with unfair systems, like the poll tax example, I agree with that approach also, complying with non fair systems isn’t the way to go and also dis-enfranchises people by not having representative democracy. I have already seen this is the way Tory and Labour politicians seem more interested in the female vote as they seem to regard the male vote as not as reliable or attainable.
does any body please have the case law that the hmrc child maintenance tribunal took into consideration the retained profits for the sake of child maintenance calculations ? I have read this was awarded but I can not find the case law . have looked for months . please help
Leeanne, I am looking for this case law too. I am going through the tribunal process at the moment and have found that the CMS have failed to apply the regulations correctly. In particular section 34, 39 and 71. Please let know if you or anyone can advise