Posted on 25.10.17
The law in relation to child maintenance is changing (again!) and as if the previous system was not complicated enough!
While at first glance it may seem as though little has changed, the devil is very much in the detail when it comes to the new legislation. The CS3 “gross income scheme”, brings in an additional ‘default’ rate and enables the CMS to obtain information from the HMRC direct on the paying parent dating back six years; presumably to catch those parents who do not pay because they do not declare up-to-date information on their income to HMRC.
The key changes have significantly broadened the CMS’ powers of investigation by widening the range of information that they have access to at a very early stage in the application. If your recent up-to-date figures have not been provided to HMRC as part of your tax return or P60, HMRC may look back over the previous six years for information relating to your earnings and apply a rate of maintenance based on historic income.
This also enables CMS to access information about investment income, as well as employment income. Any investment income including savings, income from rental properties, dividends, stocks, shares etc. can be taken into account where it amounts to income over £2,500 a year. Please note that this does not include ISAs.
Another major change to the CMS payment options includes the collect and pay regime. Where previously a percentage of income (4%) could be deducted from the maintenance for using the CMS’ collect and pay, this came from the maintenance itself, therefore reducing what parent with care receives. Now, on top of this, CMS will deduct 20% from the paying parent, this does not come out of the maintenance paid, but is on top! This should deter both parents from using the collect and pay regime instead of using ‘direct pay’ between parents.
Key changes to the law on child maintenance to be implemented by the Child Maintenance Service (CMS): –
- Gross income will be used to calculate % payment for paying parent rather than net income
- Income details will be taken directly from HMRC rather than parent supplying them
- There will be an introduction of a 25% threshold for any changes in income i.e. if the change is < 25% then no change will be applied to the amount collected
- Possibility to vary maintenance based on the parents’ paying lifestyle or assets is to be abolished
- Introduction of a two-tier calculation; ‘statutory scheme’ or ‘family arrangement’
- Charges apply for using the statutory scheme
- There will be annual reviews of maintenance paid
What do I do if I want to make a claim?
- All applicants must first have a ‘gateway’ conversation with Child Maintenance Options.
- All applicants will be encouraged to consider opting for a Family-Based Arrangement (FBA)
✔ Can be written or verbal (however, writing is always advisable for the avoidance of misunderstanding)
✔ Unregulated – enforcement or security options
✔ Limited to 12 months security in Court Orders where agreed
✔ Formula based, no flexibility
✔ Can be monitored and enforced
- The new system introduced is, of course, intended to discourage applicants from using CMS and therefore is likely to be a cost-cutting measure adopted by the government to reduce the work the CMS is required to carry out.
- As yet it would seem a number of families have no arrangement in place, i.e. there have been far fewer applications under the new system than anticipated, the reasons for this is unclear but concerning if this means parents are not receiving the help they are entitled to, or are not paying for their children.
- Perhaps parents are deterred by the initial £20 fee which is now payable to CMS on issuing an application.
There are now five calculation rates for child maintenance these include:
1 – Nil rate: This applies to prisoners, under < 16 years, < 17 years in receipt of certain benefits, gross income under £7 per week, those living in a care home
2 – Flat rate: Those receiving certain benefits, gross income is less than £100 per week
3 – Reduced rate: Those with an income of between £100 and £200 per week will pay a % of their income plus pay the flat rate of £7
4 – Basic rate: Up to £800 per week you pay:
- 12% (1 child)
- 16% (2 children)
- 19% (3 or more children)
£800-£3,000 per week you pay:
- 9% (1 child)
- 12% (2 children)
- 15% (3 children or more)
These rates are reduced 1. By the existence of another child in the paying parent’s home 2. By the number of overnight stays with paying parent per year. Carry out your own calculation on CMS’ website to discover what you should now be paying.
5 – NEW Default rate – applies where insufficient information supplied to HMRC
- £39 per week (1 child)
- £59 (2 children)
- £64 (3 or more children)
Can I decrease payments if I am paying for other things?
Yes, however, only very specific items of expenditure are allowed.
This can include contact costs, where for example, travel costs are incurred for visitation, boarding element only of school fees and prior debts IF those have been taken on by the paying parent and were incurred whilst the parties were a couple on behalf of them both.
If you are having difficulty reaching an agreement concerning children or would like more information, please contact one of our family law solicitors on 0345 507 5151, e-mail firstname.lastname@example.org or fill in our online form at the top of this page.