Anna Heenan, Solicitor at Gregg Latchams LLP explains the latest changes to the child support regime
On 29 July, with relatively little fanfare, the Government announced the next stage of changes to the child support regime. Most family lawyers will be aware that child support is changing, but trying to work out where to find the new rules and what they actually mean is not straightforward. This article aims to provide an overview and, hopefully, a starting point for those struggling with the new basic rate calculation.
What has changed?
As of 29 July, the new child support regime which is based on gross income of the non-resident parent (the "gross income regime") will apply to families with two or three qualifying children if:
- Those children have the same parents; and
- There is no existing case involving both of these parents (note that the new regime will apply if there is another case involving the same non-resident parent but a different parent with care).
The gross income regime already applies to families with four or more children if the conditions above are met.
The gross income regime will be administered by the Child Maintenance Service (CMS), rather than the Child Support Agency which administers its predecessor scheme (the 2003 scheme).
The Child Support Agency ("CSA") will continue to deal with all other new applications (which will be primarily by those parents with one child) under the 2003 scheme for the time being. This means that the non-resident parent in these cases will continue to pay 15% of their net income for one child and so on. However, it is anticipated that these families will be brought within the gross income regime in the future.
The new basic rate calculation (in summary)
For completeness, the gross income regime rates for families with one child are included below, even though they are not yet within the new regime.
The new basic rate calculation is as follows:
1. Calculate gross income
2. For gross income of up to and including £800 per week, child support is payable at the following rates:
a. 12% for one child;
b. 16% for two children; and
c. 19% for three or more children.
3. For gross income of £800 to £3,000 per week, child support is payable at the following rates:
a. 9% for one child
b. 12% for two children; and
c. 15% for three or more children.
4. Make a deduction for other children living in the non-resident parent's household (for example, children of a new partner or step-children) at the following rates:
a. 12% for one child;
b. 16% for two children; and
c. 19% for three or more children.
5. Apply any reduction for shared care:
a. 1/7th for 52 -103 night
b. 2/7th for 104 – 155 nights
c. 3/7th for 156 – 174 nights
d. ½ for 175 or more night
Note that if there is truly equal shared care, no child maintenance is payable. (see Regulation 50 if the Child Support Maintenance Calculation Regulations 2012). However, if one parent receives child benefit then there is a rebuttable presumption that that parent is providing care for the child and should receive child maintenance.
Where do I find the new regime?
Unfortunately, to get to grips with the new regime involves reviewing no less than four different pieces of legislation.
1. The changes dealt with in this article were prompted by the Child Maintenance and Other Payments Act 2008 (Commencement No 11 and Transitional Provisions) Order 2013 (the "Commencement Order").
2. The Commencement Order brings various provisions of the Child Maintenance and Other Payments Act 2008 (the "2008 Act"), in particular various provisions of Schedule 4 to that Act, into force for those families highlighted above.
3. Schedule 4 of the 2008 Act makes various changes to Schedule 1 to the Child Support Act 1991 (the "1991 Act"), which deals with the calculation of child maintenance.
4. (Just in case we were feeling short on statute) the Child Support Maintenance Calculation Regulations 2012 (the "2012 Regulations"), is also brought into force for the families affected by the changes.
Who is a child?
Under the gross income regime, the age-limit for a child in full-time education is increased to 20 (s 55 of the 1991 Act).
Calculating gross income
The 2012 Regulations deal with the calculation of gross income. Essentially, it is the total of all of the non-resident parent's income from employment, self-employment and pensions. It is possible to deduct pension contributions from the gross income figure (Reg 40, 2012 Regulations).
In general, the non-resident parent's gross income will be calculated on the basis of their historic income. This is taken from their self-assessment tax return or the information provided to HMRC under the PAYE scheme. However, if the non-resident parent's current income differs from their historic income by at least 25% then it is possible to apply for a calculation based on current income.
Top up awards
The threshold for a top-up award is now £156,000 gross per annum. Therefore, in the same way as under the 2003 scheme, it is possible to apply to the court if the non-resident parent's income exceeds this threshold.
Under the 2003 scheme, it was possible to apply for an upward variation on various grounds, including that the non-resident parent had assets of £65,000 net of mortgage (which were deemed to produce an income at 8%) and that the non-resident parent had a lifestyle that was inconsistent with his or her income.
Under the gross income regime, it is only possible to apply for an upward variation on the basis of:
1. Unearned income; and
2. Diverted income
Unearned income is dealt with in Regulation 69 of the 2012 Regulations. If the non-resident parent has unearned income of at least £2,500 from property, savings, investments or certain other sources then it is possible to apply for a variation to the maintenance assessment. The extent of the non-resident parent's income from these sources is determined on the basis of information provided to HMRC.
Diversion of income, dealt with in Regulation 71, is designed to capture the situation where the non-resident parent can control the amount of income that he or she receives or the situation in which the non-resident parent pays income to another person or elsewhere to reduce his or her own income.
1. There is heavy reliance on information provided to HMRC in respect of the non-resident parent's income. This could create difficulties for those who believe that their former partner may not have been completely honest in his or her dealings with HMRC.
It is possible to ask for a review of a maintenance calculation on certain grounds (see Regulation 15 of the 2012 Regulations). These include that "the decision was wrong due to a misrepresentation of, or failure to disclose, a material fact." Therefore, if the resident parent has evidence that the non-resident parent has misrepresented their income to HMRC then it may be possible to challenge the calculation but providing such information may be difficult.
In practical terms, the resident parent will be unable to rely on information disclosed during financial remedy proceedings (which is privileged) to provide that evidence. Further, Imerman v Imerman  EWHC 4047 (Fam) places strict limits on obtaining information about a spouse's financial position. Finally, there is a time limit of 30 days from notification of the decision to ask for a revision (although it is possible to apply for an extension in some circumstances in some circumstances). Given the difficulties in securing disclosable information, it is questionable how realistic a challenge is in practical terms.
2. At present, there are no charges for using the Child Maintenance Options service. However, in its press release on the changes, the Government made clear that once the system is fully up and running there will be charges including:
- £20 application fee;
- 20% collection charge, which the non-resident parent must pay on top of the child maintenance payments; and
- 4% charge on top of payments, which is deducted from the child maintenance the resident parent receives.
The aim is to encourage as many parents as possible to reach agreements directly between themselves.
It is unclear as to whether such charges will be applied retrospectively, but it may be worth parents considering whether to make an application before such charges are introduced.
3. The Government press release referred to above suggests that those cases currently administered by the CSA under the 2003 scheme may be transferred to the new scheme in due course. The press release states:
"Once the CMS is fully up and running, all separated families currently in the CSA will be given a fresh start as their cases are gradually closed. They will be offered help and support to come to their own arrangements."
Time will tell whether the gross income regime can remedy the faults of its predecessor. However, until the changes are fully implemented, the child maintenance landscape is far from straightforward.
Source : Family Law Week - 3 September 2013