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Our top tips on calculating child maintenance 

by Shoosmiths LLP

Published: October, 2021

Submission: October, 2021

 



Many separating parents use the Government’s online calculator to agree their child maintenance payments.


We are fully supportive of parents reaching their own agreements, however using the online calculator may not always result in the right payment if parents are not fully conversant with the rules. Even parents who formally apply for an assessment by the Child Maintenance Service (previously The Child Support Agency) need to be on their guard.


Tip 1:  Ensure you use accurate and up to date gross income figures

Maintenance calculations will be based on gross income figures without any deductions for tax or national insurance. Income will include employment income, pension income (but not UK social security pension), social security income and trading income (after any carry forward trade loss relief). Gross income is then adjusted to take account of any pension contributions made during the year.


If there is a formal assessment by the Child Maintenance Service (CMS) gross income will be determined using figures provided by HMRC in a self-assessment tax return or under pay as you earn (PAYE) regulations.  if you are negotiating a private agreement don’t just accept a wage slip or drawing statement as evidence of gross income. Ask for the P60 or tax return to check last year’s income and ask for an explanation if there are any discrepancies.


If the paying parent’s current income differs from their historic income by a figure that is at least 25% of the historic income the CMS may use their current income. Whilst historic income figures must be provided by HMRC current income figures can come from any source that the decision maker considers to be reliable.


Tip 2:  Check for any additional income

A variation can be considered by the CMS if there is evidence that the paying parent:


  • Has unearned income
  • Has income from assets exceeding an aggregate prescribed value of £31,250
  • Is on a flat or nil rate but has gross weekly income equal to or more than £100
  • Has diverted income.

Rental income and income from savings and investments are not automatically included when assessing gross income. You will therefore need to consider making a variation application to ask for this income to be included.


Also be alive to the diversion of income. For example, is the paying parent giving their income to someone else or employing a relative and paying them more than market rate, or are they choosing to have a company car instead of a higher salary? Failing to pay themselves a dividend or gifting a share of the business to a new partner or relative may also be treated as diversion of income.


Finally, look out for excessive pension contributions. There is no limit on the amount of pension contribution a paying parent can make. If you think their pension contributions are excessive, or arrangements have been set up deliberately to reduce the child maintenance liability you can apply for a variation.


Tip 3: Check if you can apply for a variation by reason of special expenses

There are five categories of expenses:


  • Contact costs
  • Expenses attributable to long-term illness or disability of a relevant other child
  • Prior debts
  • Boarding school fees
  • Payments of mortgages, loans, or insurance policies.

Tip 4: Consider applying for a “top up” maintenance order

Where a calculation has been made by the CMS based on the maximum level of assessable income (£156,000 per annum), the court recovers the power to make an order for "top-up" maintenance. An order for "top-up" maintenance is an order requiring the paying parent to make child maintenance payments over and above the CMS child support calculation. It does not extinguish or replace the CMS calculation, rather a top-up order is payable in addition to a CMS child support calculation.


For further advice on navigating child maintenance, please refer to our article Child Maintenance: Trap for the Unwary


 



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