Understanding the New Child Maintenance Scheme
In August 2012, the Department for Work and Pensions (DWP) took over responsibility for the child maintenance system. Child maintenance is defined by the DWP as “regular, reliable financial support that helps towards the child’s everyday living costs”. The non-resident parent (NRP) pays child maintenance to the parent who has the day-to-day care of the child.
The new legislation is aimed at supporting and encouraging parents to agree their own “Family Based Arrangements” instead of relying on the legal framework, which can increase animosity in families already going through a difficult time. From the 25th November 2013, cases where parents cannot agree their own arrangements will now be directed to the new Child Maintenance Service (CMS). Cases opened before this date will still be handled by the Child Support Agency under the old rules.
What has changed?
The previous definition of a ‘child’ was someone up to the age of 18 in full time education but it is now those in full time education up to the age of 20.
- The new scheme calculates the level of child maintenance based on the NRP’s gross income (previously, it was based on the NRP’s net income) although pension contributions are discounted.
- In calculating gross income, the NRP’s historic income is used, usually from information provided to HMRC under a PAYE scheme or from their self assessment tax return. Only if the current income differs by 25% is it possible to apply for a calculation based on the current income.
- If the NRP’s income is more than £156,000 per year, then the court would have jurisdiction to deal with an application for a ‘top-up’ award.
What is the new calculation?
If the NRP has an income of less than £5 per week, there is no liability. If their income is less than £100 per week or they receive certain benefits, there a flat rate of £7 is applied. If the NRP has an income of between £100 and £200 per week, a reduced rate applies so that they pay the flat rate of £7 plus a percentage of their net weekly income. In all other cases, the basic rate applies.
The basic rate is as follows:
- For gross income between £200 and £800 per week:
a. 12% for one child
b. 16% for two children
c. 19% for three or more children
- For proportion of gross income between £800 per week and £3000 per week:
a. 9% for one child
b. 12% for two children
c. 16% for three or more children
- If there are children living with the NRP (not necessarily their own child, but for example their partner’s children) then a deduction is made of:
a. 11% if there is one child
b. 14% if there are two children
c. 16% if there are three or more children
- If the NRP cares for the children (if more than one child, this means all the children) overnight, then a reduction will apply of:
a. 1/7th if the child(ren) are cared for overnight 52-103 nights each year
b. 2/7th if the child(ren) are cared for overnight 104-155 nights each year
c. 3/7th if the child(ren) are cared for overnight 156-174 nights each year
d. ½ if the child(ren) are cared for overnight 175 or more nights each year
If the child(ren) spend equal amounts of time with each parent, no child maintenance is payable. In the event of a dispute, a parent receiving child benefit will be deemed to be the parent with care and should receive child maintenance.
There may be cases where a NRP’s assessed income is wholly inconsistent with their lifestyle. Under the previous regime it was possible to apply for a variation to the maintenance assessment. This is no longer possible and an application for an upward variation can only be made on the basis of unearned income (from property, savings, investments etc.) or diverted income (where the NRP pays income to another person or otherwise to reduce their own income).
The new rules are an attempt to reduce the costs of the child support regime. Currently there is no charge involved in seeking a child maintenance assessment. Parents are now being encouraged to reach an agreement between themselves and the government says it will give help and support to do so.
In an effort to actively encourage people to try to reach an agreement, once the new scheme is up and running and is judged to be working successfully, charges will be introduced as follows:
- £20 application fee.
- 20% collection fee which the non resident parent will have to pay in addition to the assessed payments.
- 4% charge on top of payments which are deducted from the maintenance payments received by the parent with care.
If the NRP stops paying, the CMS will step in to enforce payments.
The aim of the new CMS is to be able to process applications and make payments more quickly than under the old scheme, preventing a build up of arrears and potential financial hardship for the parent with care. The NRP’s financial situation will be reviewed annually to make sure the payments are fair and accurate so if a NRP fails to pay, quicker and more effective enforcement action will be taken.
The new calculations are slightly more complex than the previous regime. Whether they will be effective and work better than the previous regime only time will tell.
If you are separated or divorced and need advice as to the level of child support which should be paid by you or to you, please contact the family team at Leeds Day Solicitors, either by telephone: 01480 474661 or email: email@example.com