May 20 2022

Child Support: how does it work?

Child Support: how does it work?

confetti, from flickr under creative comms licence, kevin hADVICE GUIDE: Most people do not realise it but the system of collection of child support is changing again – see, here for BBC report (‘Thousands of letters are to be sent to single parents in Britain informing them of changes to their child maintenance arrangements’). There are currently three schemes all running together.

  • Stephen Lawson is a member of the family lawyers’ group Resolution’s committee for child support

The first scheme came into effect in 1993. The complex maintenance formula took account of the income of both parents. There are currently almost 400,000 live cases still on this scheme. The Government changed the formula in 2003 – using the ’15/20/25 per cent of net income’ of a paying parent for one, two or three children respectively. There are currently 800,000 live cases on this scheme. In 2008 the Labour Government created the Child Maintenance & Enforcement Commission (CMEC) to administer these two schemes. The coalition Government abolished CMEC in August 2012.

The Child Support Agency still exists to administer these first two schemes – but it has closed its doors to new applicants. New child maintenance applications are dealt with by the Child Maintenance Service (CMS). CMS started taking cases in December 2012 for those parents with four children by the same paying parent.

The scheme was extended to parents with two or more children by the same paying parent in July 2013 and all other new applicants have had to apply to CMS since November 2013. The existing 1.2 million families on the original two schemes will, over the next four years, gradually be told that their cases will be closed and that they will now have to apply to the CMS if they want to continue receiving maintenance through the statutory service.

CMS is different
CMS prepares a calculation using historic income of the paying party as last disclosed to HMRC – it will only take account of current income if there has been a 25% increase or decrease on the historic income figures held by HMRC.

The formula is based on gross income (i.e. before deduction of tax and National Insurance). The income used does not include any income received by way of interest, dividends or rent – unless the receiving parent actually makes a formal claim to CMS to have this type of income included. This can produce particular complexities where the paying parent is self employed or can control their own income (perhaps by being a director of their own limited company). CMS promise to update calculations on an annual basis.

Parents no longer have a right to use CMS – before an application is made they have to have a ‘gateway conversation’ with an organisation called Child Maintenance Options who will give information about the alternatives to using the statutory scheme – with particular emphasis being given to encourage parents to make their own agreements – known as ‘family based arrangements’ or ‘FBAs’.

There is huge incentive for parents to reach their own agreement because if maintenance is collected by CMS then the paying parent will soon have to pay 20% in administrative fees over and above the assessment – and the receiving parent will have to pay 4%.

By way of illustration, if there is an assessment of £100 per week the paying parent will actually pay to the CMS £120 and the receiving parent will collect £96.

Other fees will be charged for enforcement action. There are currently only approximately 50,000 cases on the CMS scheme so it is premature to comment upon the efficiency or otherwise of this organisation. These 50,000 families have just received, or will shortly receive, letters warning them that fees will be charged on their cases unless maintenance is paid outside the statutory scheme. Parents using the CSA will not have to pay fees until their case is transferred to CMS over the next few years.