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New proposals for the Child Maintenance Service published

The Child Maintenance Service was set up with the intention of encouraging separated parents to meet their responsibilities to provide their child with the financial support they need. 

When one parent is primarily responsible for raising a child, the other parent will provide them with regular financial support, this is called child maintenance.  

In most cases, the parents come to an arrangement between themselves, but in some instances, the Child Maintenance Service (CMS) may need to step in. 

Earlier this week the Department for Work and Pensions (DWP) published new proposals aimed at modernising and improving the CMS. 

When the CMS calculation rules were updated a number of years ago the rules on additional assets and unearned income were not included automatically. 

That is to say,  in addition to the home where you live, if there are further assets, investments or property of any kind then the payer can (possibly) since December 2018 be deemed to have an income from these assets as to the amount their net value exceeds £31,250.  This at least corrected the perceived injustice. 

The rate of income is 8% of the gross value.  For example where a second property has a relevant equity of £131,250 less allowance for any mortgage or charge this could result in presumed additional income of £8,000 per annum.  This is then taken into account in the income calculation.  

The definition of assets applicable to this rule is wide but excludes the payer for the child’s home and excludes:- 

  • Compensation for a personal injury suffered by the payer;
  • Assets used in the payer’s business/trade;
  • Assets the CMS is satisfied could have been purchased from the payer’s gross weekly income which has already been accounted for in calculating maintenance;
  • Assets that would need to be sold but whose sale would cause hardship to the payer or a child;
  • Assets otherwise unreasonable to be taken into account. 

In effect the rule is very wide. However, as with unearned income the additional assets departure has to be applied for. 

We now potentially have another yawning gap in the armoury of the CMS being addressed. 

There has long been an approach that only earned income rather than “notional” income would be taken into account.  However, at present only earned income is initially relevant and therefore not interest received, rental income, dividend or indeed any capital over £31,250.  This is what may change. 

It is presently for the parent with care to apply to the CMS for a “variation”.  This would be applied to the assessment if just and equitable to do so.  Presently unearned income is initially not taken into account. But this  unearned income must equal or exceed £2,500 per annum to be relevant

If there is additional income, as the CMS would have HMRC carry out the investigation ‘variation’ from self assessment tax return information, it is usual the figures will be slightly historical.

For further information on any of the above or any other family matter contact Marie Whittaker or Lee Marston for a free, no obligation interview on 0161 764 5266 or via email info@clough-willis.co.uk