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Child maintenance – common myths and COVID

Child maintenance can be both a bone of contention and a source of stress for separated parents.

And those worries are likely to be heightened when people’s financial circumstances change for the worse. Of course, that’s what’s happened to many people because of the pandemic.

Take furlough for example.

Recent statistics published on the UK Parliament website show, by midnight on 14 June 2021, 11.6million employee jobs had been furloughed.

Being furloughed, losing your job or being unable to trade as a result of restrictions all affect our income. And, for some, the question is how that impacts any child maintenance they have to pay.

Plus, how can parents avoid paying more than they can afford? And what happens if you’re the parent who receives the maintenance and your income’s been affected too?

The approach varies depending on your circumstances.

Statutory arrangement

A statutory arrangement is when the Child Maintenance Service (CMS) has carried out an assessment which dictates how much the paying parent is due to pay.

This may be paid direct between parents or collected via collect and pay (the CMS uplifts the maintenance from one account and deposits it in the other).

Here, the CMS collects PAYE data from HM Revenue & Customs (HMRC) and considers the most recent tax return to determine the level of maintenance payable. The information for employed and self-employed parents is then reviewed and reassessed annually.

What do you do then if your income’s dropped?

You should apply for a CMS reassessment straight away.

If you’re employed, you’ll need to prove your pay has reduced. If you’re self-employed, it can be a little more complex because assessments are carried out using the previous year’s tax return, so the best approach is to have your accounts for financial year ending April 2021 prepared early.

If you find yourself unable to trade at all, another option would be to apply for benefits, in which event you would pay the minimum amount basic rate of child maintenance.

You should contact the CMS immediately as changes cannot be backdated and arrears will continue to accrue. Verbal evidence may be accepted in the first instance if material evidence is not immediately available.

Family arrangement

A family arrangement is when the parents have reached an agreement without input from the CMS. The child maintenance calculator is a useful tool here.

If you’re the paying parent and you have less money coming in because of COVID-19, a great starting point is to let the other parent know.

Act quickly, share evidence of your reduced income and pay what you can. Following these steps will reduce the chances of a CMS referral, particularly if the other parent is confident you’ll start payments again when you can. If you agree a lower rate, best to document that in a minute of agreement to help protect against an increase of that lower rate for 12 months.

If you’re the parent receiving the maintenance and things change without any explanation from the other parent, you should refer the matter to the CMS as soon as possible.

It will only consider liability from the date the application was made: it won’t enforce backdating any missed payments under an informal family arrangement.

Common myths

Eighty percent furlough pay is a reduction sufficient to qualify for reassessment.

Not true.

Parents must show a 25% drop in income to qualify for reassessment as a result of the pandemic.

If I have a minute of agreement detailing how much child maintenance is to be paid, this can’t be changed.

A minute of agreement stipulates how much a parent should pay for a period of 12 months. Beyond that, either parent may apply for CMS reassessment.

Most agreements will have a variation clause which allows for alterations if there’s a material change in circumstances, including within the first 12 months.

Unearned income is not taken into account in an assessment.

Not true.

Income from rental properties, investments and dividends over £2,500 a year can be taken into account. Extra assets of a significant value can be deemed to be earning up to 8% (whether they are or not). Assets such as shares, stocks or money in the bank worth more than £31,250 could fall into this category.

Parents must accept the CMS assessment.

Not quite.

Parents have the option to object within 30 days of the decision. Receiving parents may provide information to the CMS themselves to inform the assessment. Any further challenges can be appealed to the first tier tribunal.

If you’re interested in other family law commentary, you can take a look at all the blog posts in that category.

Rosie Allan

Aberdeen-based solicitor Rosie helps clients, both in and out of court, with a wide range of family matters, including separation; child residence and contact; cohabitation agreements; adoption and divorce.

Posted, 27 July 2021 by Rosie Allan
Categories: Coronavirus | Coronavirus and family law | Family law | Insights