The Child Support Agency (CSA) will close and is being replaced by the Child Maintenance Service – but they’ve dropped the words “and Enforcement” from its title – because that’s what it will do. So we can’t say what it’s to do on the tin, it might upset people! There will be changes to the child support calculation. The old basic formula (15% of the paying parent’s net income for one child, 20% for two and 25% for three or more children) is being replaced by rather less memorable percentages of the gross income.
- There will be a £20 application fee and collection charges. There will be additional charges if the child maintenance service has to collect money from the paying parent and that will be 20% on top of the child maintenance amount and the receiving parent will have their maintenance reduced by 4%, so those are quite significant payments, particularly for the paying parent. However, if you make the arrangements for payment direct between you these charges do not apply, so it’s very much in everyone’s interest to avoid using the CMS if they can.
- Transfer of CSA cases to CMS. Over the next few years everyone using the CSA will have their cases closed, so once the new service is working well, parents will be given six months notice their CSA cases are closing and you then have the option of applying to the CMS if you need to BUT you can always contact out and a agree yourselves direct.
- CSA Arrears. If you’ve got to arrears of maintenance of the CSA those stand and they can still be enforced, so they’re not going to disappear, but you may have the same problems you’ve got now – though the CMS and can help setting up and collecting maintenance and its new powers are likely to make it very effective at this.
- HMRC to tell CMS paying parent’s income Perhaps the most effective change is that the CMS will use information from Her Majesty’s Revenue and Customs (HMRC) to access information about the income of the paying parent’s income and this will be checked with HMRC each year to make sure the calculation is still correct. This is a really practical development, as previously some people who might not want to defraud the HMRC, might still play games with the CSA, now they can’t.
- Family-Based Arrangements – DIY Before you can apply to the CMS you will speak to the Child Maintenance Options Service to talk about whether you can make a Family-Based Arrangements instead. Although they will try and encourage you to make your own arrangements where possible (as this will save the CMS money) you can apply to the CMS.
- Process If you apply the CMS will contact HMRC and find out the paying parent’s income, then using information given to them by the parent with whom the children live – the CMS will just assess the paying parent and tell them what to pay. This information includes how many children are in each household and how many overnight stays the children have with the paying parent. HMRC will use people’s National Insurance numbers to try and find them if they have disappeared, so it should be harder to escape paying.
- Once the maintenance is calculated there are two payment options:
- Direct pay, where the calculation is done but you sort it out between yourselves
- Collect and Pay, where the CMS will collect the money from the paying parent and can enforce arrears, but charge you.
The CMS calculates child maintenance using the paying parent’s gross income before deductions, to work out the payment – previously pension contributions tax and national insurance could be deducted. Other income such as interest on savings, income from a company, or on rental property is ignored in the initial calculations. Assets such as savings and property are also ignored. If the paying parent has other income or savings you can ask the standard child maintenance calculation to be varied so that these are taken into account. An important note – income of the paying parent’s partner is not included in the calculation, never has been, no change. Details of special rules are beyond the remit of this article.
The rates; there are different rates of child maintenance depending on the paying parent’s income.
There are nil, flat and reduced rates for none or low income parents, but for most parents paying maintenance the situation is set out below:
- The basic rate of child maintenance: the paying parent pays the basic rate if none of the other rates apply. It’s a percentage of the paying parent’s gross income calculated in two stages:
- Stage one – the paying parent’s gross income is reduced depending on the number of children living with them, if any, this includes the children of the new partner living with them.
So – Stage one example:
If there’s one child living with the paying parent the percentage gross income is reduced by 11% two children it’s 14% reduction and three or more it’s a 16% reduction.
- Stage two
Maintenance is a percentage of the amount left from the gross income after any deductions are made in stage one. The percentage depends on the number of children that need to be paid for. The amount is rounded to the nearest pound.
|Number of children applied for||Percentage of gross income up to £800||Percentage of gross income over £800|
|Three or more children||19%||15%|
If you share care of your child – and this does mean overnight stays – then the child maintenance award can be reduced by a seventh if on average of the child or children spends 52 -103 nights of the year with the paying parent, and so on and so forth.
If the paying parent has other children they don’t live with from another relationship, then that will reduce the amount of maintenance paid to both families.
Useful sources of information:
www.gov.uk/child-maintenance There is an online calculator
Remember if you are or have been married there may be spousal maintenance due in addition, so worrying overmuch about the CMS may be pointless.
The CMS has a range of potentially draconian powers to enforce payment – they can:
- Take money directly from your earnings.
- Take money directly from your bank, building society and post office accounts
- Use enforcement powers through the courts to get child maintenance paid and
- Get orders you pay these court costs as well
- This can affect your credit rating and make it difficult to get loans or mortgages
- The CMS can apply to court for a Liability Order and then
- Send bailiffs to go to your home and seize belongings
- Put a charge against your property or other assets so you can’t sell or re-mortgage
- Force the sale of your property or assets
- Take away your driving licence and
- Send you to prison.
If people try to avoid paying child maintenance by giving the wrong information or none, or don’t tell CMS their circumstances have changed or have disposed of assets so they can’t enforce maintenance – there is a long list of rules getting tough evasion and collection action. There may be some rather sad cases, especially if they get it wrong.
What are the changes intended to achieve?
The gargantuan cost of the CSA has been out of all proportion to the value of maintenance it collected. It has struggled to get it right and to collect money from determined non payers. The changes are intended to bring about a huge change as follows:
- Reduce the costs to the tax payer of collecting child maintenance
- Increase accuracy of assessment by using HMRC information about income
- Collect more child maintenance with better enforcement powers
- Make people see they will have to pay so
- They calculate the payments themselves and pay without using the CMS, so see 1 above!
Will it work? Probably in most cases . . . . but we shall see what effect the Law of Unintended Consequences has this time. . . ..