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How will the Child Maintenance Service treat the other parent’s dividends?

It is often the case that self employed business owners will arrange to be paid a salary at or around the level of the tax free annual allowance. They will then receive a dividend (being a share of the profits) which will usually only be declared once a year. How will this be treated by the Child Maintenance Service (CMS) when they are calculating maintenance on a weekly basis?

The CMS calculate maintenance based on the paying parent’s gross taxable income. This will not initially include dividend income or any other unearned income. The parent seeking maintenance will need to apply for a variation to have this income taken into account, which the CMS will do if it is over £2,500 per year.

In Secretary of State for Work & Pensions v Wincott [2009] EWCA Civ 113 the court decided the following principles:-

  • Section 1 of The Child Support Act 1991 imposes upon the paying parent a duty to provide maintenance to the child;
  • Regulation 19 of the Child Support (Variation) Regulations, which deal with dividends, simply identifies when the Secretary of State may consider a variation and there is no requirement that the dividend should be a regular amount;
  • It does not matter that the dividend relates to a period of time where the paying parent’s income was otherwise low (the previous accounting year);
  • The weekly amount must be notionally spread across the weeks succeeding the date of payment because it cannot otherwise be added to any future payment;
  • So a payment of dividend will be picked up in the following tax year.

The other points to bear in mind are that if the payment of dividend represents more than a 25% increase in the income of the paying parent, a variation could be requested.

There is also an ability to challenge a calculation where the paying parent is diverting their income in order to avoid paying maintenance. Your challenge must be brought in a timely manner so if you believe a calculation is wrong you must request a mandatory reconsideration and variation or appeal and do not let it drift.

Contact a solicitor

If you have any queries or wish to discuss your circumstance, please contact Emma Gordon who is a specialist child maintenance solicitor.