Should a redundancy payment be treated as part of an NRP’s current income for the purpose of assessing child support liability?
It must be a very common scenario whereby a non-resident parent (‘NRP’) receives a redundancy payment. As the payment, or at least part of it, is designed to be compensation for loss of income, it would surely be logical to assume that the payment would be taken into account as income, when calculating the NRP’s child support liability. However, as we will see, that is not so.
However, as we will also see, that is not necessarily the end of the matter.
A straightforward question
The matter fell to be determined in the recent Upper Tribunal decision BB v Secretary of State for Work and Pensions and CB (CSM) (Child support – calculation of income).
The relevant facts of the case were as follows (as usual, I will do some simplification, for the sake of clarity).
The parents married in 2002 and have three children, now aged 15, 13 and 12.
The father was employed in a well-paid senior role at a City merchant bank.
The parents separated in 2012.
In 2014 the court made a financial remedy order, which included provision for the father to pay child maintenance at the rate of £500 per child per month.
The father’s gross salary in the 2015/16 tax year was £187,771. However, in March 2016 his employers notified him that he was being made redundant – he was then sent on “gardening leave” for three months. In June 2016 he applied to the Child Maintenance Service (‘CMS’) for a child support assessment. The CMS calculated his child support liability as £413.13 a week, based on his historic gross income for the 2015/16 tax year, as provided by HMRC. The assessment was equivalent to £1,795.15 a month, approximately £300 a month more than the court-ordered level of child maintenance.
The father then asked for a reconsideration of the assessment, advising the CMS that he made been made redundant on the 20th of June 2016. He had received a redundancy payment of some £75,000, net of tax. The CMS revised its assessment, substituting a nil assessment, as a result of concluding that he now had a nil income. The mother appealed.
In February 2017 the father took up new employment, at a salary of some £43,000.
The mother’s appeal was heard by the First-tier Tribunal in January 2018. It found that the redundancy payment was income for the purpose of child support, and it, therefore, directed that the child support should be reassessed, on the basis that the redundancy payment comprised the father’s gross income until February 2017, when he took up his new employment. The father appealed, to the Upper Tribunal.
As the Upper Tribunal judge said at the beginning of his decision, it seems a straightforward question: is a redundancy payment treated as part of an NRP’s current income for the purpose of assessing his child support liability? As he went on to explain, it was far from straightforward. However, thankfully for the purpose of this post, I do not need to go into the technical details. Suffice to say that he found that, somewhat bizarrely, it does not count as income. Accordingly, the appeal was allowed, and the nil assessment reinstated.
That may have been the end of the matter in this case but, as I have indicated, it is not necessarily the end of the matter in all cases, and certainly not in new cases. As the judge pointed out, the child support rules were altered on the 31st of December last, so that if the NRP has assets exceeding a prescribed amount, currently £31,250, a notional income of 8% can be applied to the value of those assets. That amount is added to the NRP’s gross weekly income when calculating their child support liability.
You can read the full decision of the Upper Tribunal here.