Coronavirus effect on child support

Acting promptly
Coronavirus effect on child support
November 25th, 2020

The effect of the coronavirus lockdown measures mean that many people are either off work or out of work whether that is on furlough or subsequently made redundant but, in both cases, there is a significant reduction in incomes.

The law has not changed as a consequence of the lockdown measures and application of the current law will be applied to the child support system to deal with any change of circumstances.

The system is administered by the CMS (Child Maintenance Service) and it is part of the DWP (Department for Work and Pensions); the latter is responsible to administer most welfare benefits.

The effect of the lockdown measures has been experienced at the DWP who have put in special measures to cope with the influx of additional applications. There may well be some CMS staff assigned to other duties within the DWP and there may well be many of them that are self-isolating. Of course, this is going to have an impact on the CMS system, which is, inevitably, going to lead to some delays being experienced by parents. It is imperative, regardless of how soon the CMS deals with reports of any changes in circumstances, for the change of circumstance to be reported promptly to the CMS and, it is pointed out, the date of the report, despite the delays to process the information, will be the key date used by the CMS. Those that fail to report the change promptly could find themselves paying a lot more child support payments then they should have been doing and it could also result in significant arrears accruing, which they will not be able to do anything about.

The CMS are able to obtain information about a paying party direct from HMRC (Her Majesty’s Revenue and Customs) and this is the usual practice of the CMS.

Where a paying party files a self-assessment tax return, HMRC will provide the most recent tax return figure to the CMS and, if a party is an employee, it will provide the figures filed at the HMRC by that person’s employer under the PAYE (Pay As You Earn) scheme. Of course, this relies on historic data and could be more than one year out of date.

Each year, the CMS will conduct an annual review of each case and the review will be completed on the anniversary of the start date of the application. This will involve the CMS contacting HMRC to obtain the most recent tax return or PAYE information and, on receipt, the CMS will then contact both parents to tell them what the new child support liability will be for the next year. The annual confirmation will provide the detail as to the income used for the assessment and the calculation used to establish the maintenance for the forthcoming year.

Whilst all that satisfactorily operates each year and in ordinary times, we are now facing unprecedented circumstances and, if there are no prompt steps to notify CMS of any change of income, the rate of child support liability will not change between the annual reviews and any payments missed will continue to accrue as arrears.

If a paying party loses their job or suffers a dramatic decreased in income, whether as a PAYE or self employed individual, or the business has failed, that information will not get through HMRC until the annual review hence the importance of acting promptly to report any change in circumstances as soon as it happens.

The CMS has a system to deal with changes albeit that sometimes it can be seen as not being perfect.

The onus is very much on the paying party to ask the CMS to make an assessment on their ‘current income’ rather than their historic income, which is usually provided by HMRC. That said, the assessment can only be carried out if there has been a change of at least 25% of the gross weekly income declared by HMRC otherwise, there is no justification for the CMS, under the regulations, to justify using the current income and it will continue to use the declared, or historic, income until the next annual review.

It is important to note the CMS will only change the child support liability to the current income assessment from the date the paying party notified the CMS the income had fallen and it will not usually backdate the change beyond that; so if the change of income took place on the 1 April but it was not reported until 1 June and whilst the CMS will backdate, when it eventually deals with the assessment and determines there has been a change sufficient to decrease the liability, from 1 June.

For employed paying parties, they will have to provide their most recent payslips but be aware, if you have been furloughed and your income has dropped to 80%, that will not meet the CMS criteria to effect a current income assessment so it is extremely important to check the current income with what was declared by HMRC at the last annual review.

For self employed people, there is slightly more information to be provided and, in short, they will have to provide their accounts for a tax year more recent than that previously used by the CMS and disclosed by the HMRC. Be aware there needs to be a complete tax year of accounts and to simply state the month by month income has reduced, will not be accepted to carry out a review.

For those parents that are caring for children, reliant on child support payments and if this was being paid on a voluntary basis and without an assessment, there are no rights to enforcement. To then establish the correct amount of liability each month, the parent caring for the children must make an application for an assessment and there is a fee of £20 to pay, which can be waived in certain circumstances such as domestic violence/abuse. It needs to be noted the enforceable child support liability will only be from the date the application is made and it cannot be backdated to include any of the period where payments were being made on a voluntary basis.

If the paying party ceases to make payments and can prove such an assessment has been carried out, the parent with care must promptly contact CMS so that they can ask for their case to be considered to move to the ‘collect and pay’ system. This is where the CMS will collect the payments from the paying party but there are charges for this facility; the paying party will pay an additional 20% of the amount collected whereas, for the parent with care, there will be a deduction of 4% of the amount collected. All this is designed to discourage applications being made to the CMS for assessment and to instigate the ‘collect and pay’ system.

It should also be noted the CMS will not enforce any arrears until a case moves onto the ‘collect and pay’ system and it will be reluctant to enforce any arrears accrued during the period before the case switches to this system. So, the emphasis is to make a prompt report of non-payment and to request to move to the ‘collect and pay’ system.

In any event, if a report of change of circumstances is made, then the CMS will contact both parents to notify them of any decision to change the amount of maintenance liability and the person with care usually has 30 days from the date of the letter to contact the CMS if they want to dispute the decision made. This is a strict time limit and if it is not adhered to, the parent with care could lose the right to appeal.

Of course, there are going to be instances where some parties look to work the system but if the parent with care does not take any action then the CMS will usually assume there is acceptance of what the paying parent is saying. So if a paying parent decided to pay himself a lower income from his business and/or divert some income to his/her partner, then the person with care could apply for a variation on the grounds of ‘diversion of income’ and this could enable the CMS to include the salary paid to any new partner when it comes to calculating the correct child support liability.

Where a paying parent is paying at the ‘flat rate’ on the basis they are receiving welfare benefit but are still receiving an income, that might also be another reason to ask for a ground of variation to be used.

If there are any assets that need to be taken into consideration, then the CMS can assign a notional income from the asset to the paying party and this is completed using the ‘assets ground of variation’. But that is a topic that will need a more detailed explanation separate to all that is said above.

For further information on this topic or any other matter, please contact Tariq M Ahmad FCILEx by telephone (+44 279 758080) or email (tariqahmad@pellys.co.uk).

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