HMRC no longer reviewing Family Investment Companies
This week sees the 25th anniversary of the implementation of the Children Act 1989, arguably the most important piece of family legislation we have seen in the last 100 years. It profoundly changed the law affecting children. Tucked away, at Schedule 1 to the Act, was an equally important change, setting out unmarried parents’ rights to financial provision for their children from their former partner.
25 years ago, the idea of cohabitants’ rights against their former partner was radical. Schedule 1 claims permitted the parent with care of the child (usually the mother) to claim proper financial support from the other parent (usually the father) and consolidated the court’s powers to make orders against individuals to pay child maintenance, lump sums and provide housing settlements to their child’s carer. All this in a country where, today, an unmarried individual still has no direct claims against their former cohabitant.
Schedule 1 is often overlooked by the unmarried mother on relationship breakdown. It has been utilised most where the Child Maintenance Service's formulaic approach has proved insufficient in cases where the family’s income and assets are significant. It has enabled unmarried mothers to make Schedule 1 claims for ‘top up maintenance’ where the non-carer lives abroad or has significant income (currently above £150,000 gross pa) and such mothers receive a carer’s allowance on top of reasonable provision for the child as well as a home for the length of the child’s dependency.
However, Schedule 1 has had unintended consequences. In the last 25 years, we’ve seen the level of child maintenance awards soar. From the early 1990s, where £20,000 pa was considered a high level of child maintenance, awards in Schedule 1 cases can now top £100,000 (one mother was awarded over £200,000 in a 2013 case). Due to the principle that it cannot be to the benefit of the child for one parent to be living in a castle while their main carer lives in a hovel, housing awards can now be in the millions.
The flip side is that it can be a long way for some unmarried mothers to fall. Unlike a divorced spouse, at 18 or the end of the child’s university education, the property reverts to the father, and the mother (and child) lose their home. So in one foul swoop, the mother can find herself homeless with the substantial support she has been receiving stopping overnight. Unless she has taken steps to secure her own independent resources, she faces a grim future (but if she had earned an independent income that would likely have impacted on the level of child maintenance she could have secured).
As a result, we’ve seen real conflicts in the unmarried family as children approach their majority - teenagers pressured to secure further education for example, which then extends their carer’s maintenance and the length of time they can stay in their family home. Even where the father has been generous and agrees that the property can be retained by the child rather than revert to him, it can create the untenable situation of a child being left with the decision of whether to ask mum to leave their home.
And the current law is perverse – the unmarried mother who has a baby with no or minimal pre-cohabitation with the father, can expect to receive a substantially greater financial award for the child’s upbringing than the mother with teenagers who has been in a long term relationship with the children’s father and may have sacrificed her career to bring up the children.
In our experience, the inadequacies of the legislation and the feelings of dependency and long term insecurity that it creates, can lead to a higher proportion of ongoing conflicts about the day to day arrangements between the parents than we see in our divorce cases. Is that really for the benefit of the child and was that really the intention of the legislators?
So, while Schedule 1 has gone a long way in ensuring that children should not be penalised financially by the breakdown of their parents’ relationship, it is not perfect in practice today. Until we have proper and long overdue cohabitation reform, the situation will not improve. In December 2014, The Cohabitation Rights Bill, a private members bill, had its second reading in the House of Lords, seeking to “address economic unfairness at the end of a relationship which has enriched one party and impoverished the other in a way that demands redress”. However, it would seem that the tsunami of impending legislative change, brought about by the Brexit vote, means that there is no prospect of its becoming law, unless those charged with amending existing family law statutes can find ways to introduce long desired reform to give cohabitants and their children proper statutory protection and status.
First published in The Times on 13 October 2016
Partner and Head of Department
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