The role of a Financial Director – a life in the spotlight
The system governing child maintenance in the UK has been undergoing a complete makeover in recent years. Late last year saw the end of the staged introduction of the “gross income” scheme and all new child maintenance applications are now under the responsibility of the Child Maintenance Service (CMS), with even more changes on the not so distant horizon.
Child maintenance is payable by the “non-resident parent” to the parent with primary care of the child upon the separation of the parties. Fortunately, the majority of parents manage to reach agreement on child maintenance but, if this is not possible, it is open to either parent to apply for an assessment by the CMS or to the court. Regardless of the individual earnings of both parties, child maintenance will always be payable in the breakdown of a relationship where one parent becomes the primary carer for any children of the relationship.
This blog sets out the recent changes – including the main points and guidelines for parents to be aware of.
Applying for Child Maintenance
As of 25 November 2013, the Child Maintenance Agency is no longer accepting applications for child maintenance. All new applications must now be made over the phone by the parent to the Child Maintenance Service (CMS).
It is not possible to contact the CMS directly to make the application – you must first phone a non-statutory body called Child Maintenance Options (CMO) on 0800 988 0988.
When calling the CMO, you will have a brief conversation with an advisor who will explain all of the options in respect of arranging child maintenance. Following this initial conversation, if you confirm that you would like to proceed to make an application to the CMS, you will be given a reference number and then transferred directly to the CMS, where you can make the application over the phone. You will be asked to provide the following details:
Should you wish to get your solicitor involved after making the initial application, you can write to the CMS advising them that you would like for your solicitor to progress your case and that all correspondence and actions going forward should be sent to your nominated third party.
Change from Net Income to Gross Income
One of the main changes introduced under the new regime is that, for all new applications, the amount of child maintenance payable will now be made by reference to the non-resident parent’s (“NRP”) gross income.
Gross income will be based on gross income figures without any deductions for tax or national insurance. The gross income figure is determined by reference to an individual’s income as declared to HMRC. If a NRP’s current income differs from his/her historic income by at least 25%, the parent with care (“PWC”) can apply for the maintenance to be reviewed.
Under the gross income scheme, the maximum amount of gross income from all sources which can be taken into account is £3,000 a week. In addition, the gross income figure is adjusted to take into account any pension contributions from the previous year, i.e. pension contributions remain deductible when calculating the relevant income figure.
If a PWC advises the CMS of a change in circumstances since last April, they will write to the NRP asking for confirmation of earnings.
The gross income scheme also introduces changes to the way in which calculations are updated. The CMS must review each maintenance calculation every 12 months. On the review date each year the CMS will, if available, obtain updated information from HMRC in relation to the NRP's earned income and if the NRP's income has changed, they may update the amount payable accordingly.
Rates of Child Maintenance
There are four rates of child maintenance which may apply which are based on the NRP’s income. The most commonly applied rate is the basic rate, which is as follows:
Where the NRP’s gross weekly income is between £200 to £800:
Where the NRP’s gross weekly income is between £800.01 to £3,000:
In addition, where the NRP’s annual gross income exceeds £156,000, the PWC can apply to the court for a “top up” in respect of the level of child maintenance payable.
Reductions to Amount of Child Maintenance Payable
When the CMS has determined the amount of child maintenance payable by reference to the above figures, deductions are made in respect of other children who are living with the NRP or whom the NRP is liable to maintain. These deductions are on a percentage basis, depending on the number of other relevant children.
In addition, where the NRP and PWC share care of the child, the level of child maintenance will be reduced in proportion to the amount of nights the child spends with the NRP.
Introduction of Fees
In addition to the changes outlined above, the government has published the Child Support Fees Regulations 2014, which are expected to come into force shortly, although the exact date is yet to be announced. The Regulations introduce administrative fees which will be charged by the CMS in respect of all child maintenance applications they process.
There will be a £20 fee payable by the applicant when making the initial application, apart from when the applicant is under the age of 19 or a victim of domestic violence or abuse.
Following the application, all NRPs will be given the option of paying child maintenance direct to the PWC. If the CMS is involved in arrangements for collection under the gross income scheme, then a fee is payable by both the PWC and the NRP, which can be referred to as “collection fees”.
In addition to the collection fees, there will also be fees payable if the CMS has to take any enforcement action against the NRP, the amount of which is dependent upon which enforcement method is pursued.
With all of these changes and rules, it is clear that the area of child maintenance is a tricky and difficult one to navigate. However, with the defined guidelines as set out above, it should hopefully be one matter which separating parents can reach agreement on without too much debate or acrimony.
For more information on how to make an application for child maintenance or advice on how to reach agreement in respect of child maintenance with your spouse, please contact a member of our Family Team.
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