It may seem paradoxical, but you can save money by doing away with your income. How is this possible? Welcome to the weird and wonderful world of child support maintenance.
I’ve written here previously about the recent report from the single parent charity Gingerbread that looked into the issue of child maintenance avoidance. The report examined the experiences of five receiving parents whose former partners were allowed to pay minimal maintenance or avoided it altogether, as a result of the child support system failing to take their true financial circumstances into account. As I mentioned in that post, one of the five parents was the mother in the case Green v Adams, in which Mr Justice Mostyn commented upon the ‘extraordinary state of affairs’, whereby it was possible for the father to be required to pay child maintenance of only £7 a week, despite the fact that he was a multi-millionaire.
The reason for the father paying so little was that he was essentially living off his capital, with very little income. The maintenance amount was calculated by reference to his income, hence he paid so little.
As Mr Justice Mostyn explained, prior to recent amendments to the child support legislation it had been possible for the recipient of child support to seek an upwards variation of the maintenance, on the basis that the non-resident parent (NRP) had assets. The way this would work was that the assets would be treated as generating a notional income, which would be included in the maintenance calculation. The government chose to do away with this ‘assets ground’ of variation, when it brought in the current, 2012, child support scheme.
The Green v Adams case returned before Mr Justice Mostyn the other day, and he had a few more things to say about the removal of the assets ground of variation. He pointed out that the Gingerbread report records how when the mother in the case took the matter up with the relevant Minister, she was told that compared to under the Child Support Agency, the scope of income which could now be captured by a possible variation had been widened to include almost all sources of gross income identified in the self-assessment process, and that this would “make it harder for wealthier individuals, with income from other sources, to avoid their responsibilities by minimising the amount of child maintenance they pay.” This, as Mr Justice Mostyn pointed out, was a non-sequitur, because the assets ground of variation was focussed on people who arrange their affairs so that they do not have any income but who rather live on their capital.
The report goes on to say that when pressed the Minister gave a second reply which was that “[the child maintenance scheme] does not attempt to provide a unique, bespoke solution in respect of the care of each child whose parents live apart, as it would be prohibitively expensive and time-consuming to do so.”
This, as Mr Justice Mostyn said, is dispiriting. He went on:
“The scheme should surely strive to provide a just solution in all cases; for the few as well as the many. Justice surely should not be sacrificed on the altar of managerial efficiency. Ease of administration surely does not furnish an objectively reasonable justification for a process that allows a multi-millionaire father to get away with paying child support for his son of a mere £7 per week.
The assets ground of variation reposed on the statute-book, to my knowledge, quite unremarkably for over 10 years, and was in fact successfully deployed in this case …. To empower a factfinder to determine if arrangements have been made to place assets in non-income-producing structures would not, on any view, be prohibitively expensive and time-consuming; but even if it were relatively expensive and time-consuming, why as a matter of justice should the exercise not be carried out? If the ground is not reinstated then I foresee more cases seeking singular awards of capital, such as the one which I have determined, coming before the family court. And the family court taking an ever more expansive view of what does constitute singular expenditure.”
As it stands, we have a situation whereby a wealthy NRP can substantially reduce their child support liability, or avoid it altogether, simply by arranging their finances so that they have little or no income.
Now, I’m not of course genuinely suggesting anyone do away with their income merely to avoid paying child support, no matter how aggrieved they are at the prospect of paying money to the other parent. Apart from anything else, if they have significant capital then the amount of income they will be able to generate from it will surely exceed the amount of any child support liability by a considerable margin. Doing away with that income will only therefore amount to cutting off your own nose to spite your face, as my mother used to say.
Still, the fact remains that the situation whereby a multi-millionaire can get away with paying little or no child support is quite absurd, and an insult to the child. As Mr Justice Mostyn suggests, it surely wouldn’t cost that much to bring back the assets ground of variation, and even if it did, we owe it to that child to do so.
Mr Justice Mostyn’s latest judgment in Green v Adams can be found here, and the Gingerbread report to which he refers can be downloaded from this page (click on the ‘Children deserve more: challenging child maintenance avoidance’ link, and a drop-down will appear, with a link to the report).