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New Gross Income Child Maintenance Scheme Rolled Out For All

28/01/14

The Child Support Agency (CSA) has changed the way it calculates child maintenance payments.

Under the old CSA rules, which have been in place for the last ten years, child maintenance was calculated from net income.  Non-resident parents paid a contribution of 15% of their net income for one child, 20% for two children and 25% for three or more children.  That rate was discounted to take into account the nights the children spent with the non-resident parent, or the costs incurred by the non-resident parent in seeing the children, as well as any other children the non-resident parent was living with.   

The new scheme was introduced as a pilot in December 2012 for cases involving four or more children.  In July 2013 it was extended to families with two or more children and since November 2013 it now applies to everyone. 

Maintenance is now calculated from gross income and is slightly more complicated.  In families with one child living with the parent with care (which is what the CSA calls the child’s primary carer) the non-resident parent must pay 12% of their gross income up to £800 per week and 9% of any gross income above £800 per week.  Where there are two children payments of 16% of weekly income up to £800 and 12% of income over £800 are required, and where there are three or more children payments of 19% of income up to £800 per week and 15% of income above £800 per week. 

Reductions to the rates above can still be made on the grounds of costs of contact and shared care (i.e. the number of nights the children spend with the non-resident parent) and, unlike under the old system, reductions on both grounds can be applied to the same case.  The payment rate is also still reduced if the paying parent has another child living in their household, although the reduction is not as large as under the old scheme.

In most cases, calculations under the new scheme will produce a very similar figure to that produced under the old scheme.  However, the advantage of the new scheme from the point of view of those administering it will also be the main disadvantage to some parents with care.  As the new scheme relies on gross income figures, the CSA can contact HMRC directly and obtain either PAYE information or self-assessment tax returns.  In most cases the CSA will simply take the figures accepted by HMRC and apply the formula, making it more difficult for parents with care to challenge the level of income declared by the non-resident parent.  In addition the old scheme allowed the CSA to deem a return of 8% on any assets the non-resident parent had over £65,000 and to increase a non-resident parent’s liability if his or her lifestyle was inconsistent with their disclosed income.  Neither provision exists under the new scheme.  If there are no tax records or the current income is at least 25% greater or lesser than the income disclosed in the last tax return the CSA will, however, attempt to establish the non-resident parent’s actual level of income.

Both schemes place a cap on the level of income used for the calculations.  Under the new scheme CSA calculations will only apply to gross income up to £3,000 per week (£156,000 per annum).  If the non-resident parent’s income exceeds that amount an application can be made to court for “top up” maintenance under Schedule 1 of the Children Act 1989.

It is, of course, still possible to negotiate private financial arrangements outside the CSA rules and the Family Team at Harcus Sinclair is happy to assist with any issues of child maintenance and financial support for children generally, including capital and property claims.

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