An introduction to the gross income scheme
Child maintenance regulations, now administered by the Child Maintenance Service or CMS (previously the Child Support Agency or CSA who will now only see out ‘old’ maintenance cases) have changed significantly and the new law is now in force.
These changes may apply to you:
- If an application for a maintenance calculation is made now;
- If you have a court order setting out financial matters including child maintenance following divorce, a year after your order has been in place; or
- If you are within one of the old systems as your current arrangements are brought to an end.
Among the most noticeable of the changes is the switch to a formula based on gross income instead of net income. For some it will simply mean a slight adjustment to the payments made/received. However, for others it will mean significant adjustment to payments. The reason is a collection of new regulations and the abolition of some previous regulations which set out what income is to be taken into account when deciding the maintenance to be paid. A few examples are set out below:-
- Income information is now taken from HMRC, with the last available tax return used as the basis of the calculation i.e. historic income data.
- BUT if the paying parent’s current income is more than 25% lower then they can request to use current information instead.
- A calculation can no longer be varied because the paying parent’s lifestyle is inconsistent with the income declared on their tax return.
- Nor can maintenance be increased because the paying parent has assets of over £65,000 which could be used to generate further income.
- Where there is equal shared care there will be no maintenance; previously the maintenance would be reduced by half. There are also changes where there is shared care but the amount of care is disputed.
- There will be an assisted, accelerated process available for victims of domestic abuse. It has not been widely publicised and people should seek advice on the alternate procedure.
- Expensive fees will be charged to BOTH parents if the CMS are collecting the maintenance from one parent and paying it to the other. For higher earners with 3 children or more, payment and collection of child maintenance could cost more than £100,000 in fees alone over the lifetime of the calculation when charges come in later in 2014. That is money which goes to the government and is never seen by the child.
The wide misconception is that the new formula will not make much difference. This simply is not the case for some who rely on the current formula as the basis of the maintenance they pay or receive.
If you are already in the child maintenance system then the best advice is to get ahead and seek expert guidance on what the changes mean for you. Even if your child maintenance arrangements are reached by agreement in most cases you will not be able to prevent the other parent going to the Child Maintenance Service in the future. You should understand the new rules and how they could apply to you.