Michelle Buckle, Stuart Barton (Head of Department), Samantha Cole, Paula Fraser

The Child Support Agency (CSA) has never enjoyed the best of reputations. Many parents who have used the CSA, either to make payments or receive payments of child maintenance, will have horror stories of computer problems, lost paperwork, inflexible systems and above all, frustration. In 2008, the CSA tried to enhance its reputation by adopting a new name – the Child Maintenance Enforcement Commission or CMEC for short. As with most corporate re-branding exercises, the change of name fooled nobody and the same problems persisted.

In 2012, the name of CMEC was abolished so we are currently back to where we started – the old CSA rides again. Somewhat under the radar, changes were then introduced in December 2012 to the way that the CSA calculates child maintenance. These changes only apply to a select minority of people who use the CSA but over the next few years, they will eventually apply to both new applicants to the CSA and parents who currently use the CSA.

It remains true that many separated parents are able to resolve child maintenance without using the CSA at all, simply by making their own calculations and coming to an agreement. This is definitely a good thing. However, there has always been, and will continue to be, a large number of separated parents who simply cannot agree upon child maintenance. Sadly, there will also be a large number of parents who refuse to meet their obligations to pay child maintenance. As the Courts only deal with child maintenance in very limited circumstances, there is no sign of the CSA vanishing into the wilderness.

The existing system – net income
The current CSA system is based upon ‘net income.’ It divides separated parents into two categories:

1. Parents with care (PWCs) – this is the parent who cares for the child/children for the majority of the time; and
2. Non-resident parents (NRPs) – this is the parent who does not care for the child/children for the majority of the time.

The current system specifies that a NRP should pay child maintenance to the PWC. The calculation is based upon the NRP’s net weekly income. This is their gross weekly income less tax, National Insurance and Pension contributions. Child maintenance is then normally paid at the following rates:

• 15% if there is one child with the PWC;
• 20% if there are two children with the PWC;
• 25% if there are three or more children with the PWC.

Deductions to a NRP’s child maintenance can be made if they have care of the child/children for more than 52 nights during the year, if the NRP has children of their own with a new partner and in other circumstances.

The CSA do not take account of the income of the PWC at all in their calculations. This is a long-standing criticism of the CSA. It is notable that in Australia, the child support system takes account of the income of both parties before making a calculation over child maintenance. Whilst such a system appears to be much fairer, there is no sign that the CSA are planning to make such radical changes.

The new system – gross income
The new system is based upon gross income. It currently applies only to:

1. New applicants to the CSA; and
2. Parents with four or more children.

As such, the new system currently only applies to a very limited number of families. Under the new system, the calculation is based upon the NRP’s gross weekly income rather than their net weekly income. Pension contributions can be deducted before the calculation is made. It is somewhat more complicated than the current system, but it is intended that a NRP would pay child maintenance as follows:

Gross weekly income of NRP

One child

Two children

Three or more children

 

Less than £200

 per week

Reduced, flat and nil rates apply

£201 to £800

 per week

12%

16%

19%

£801 to £3000

 per week

12% of income up to £800 and 9% of income above £801

16% of income up to £800 and 12% of income above £801

12% of income up to £800 and 15% of income above £801

Under the new system, the ‘bands’ of income are cumulative. For example, a NRP with a gross income of £1500 per week and one child, would pay child maintenance at 12% of their income up to £800 per week and 9% of the remainder of their income from £801 to £1500.

As with the current system, deductions can be made to the calculation depending upon the NRP’s level of overnight contact with the child/children and if they have children of their own. It is suggested that there will be little overall change to the level of child maintenance paid by a NRP under the new system, when compared to the current system. The best way to test that suggestion is to consider some examples.

Examples

Mark has a gross annual income of £20,000 or £384 per week. His net annual income is £15,500 or £298 per week. He has two children who live with his former partner, Stephanie. Mark is not entitled to any deductions to his child maintenance payments.

• Under the current system, Mark must pay child maintenance at the rate of 20% of his net weekly income = £59.60 per week;
• Under the new system, Mark must pay child maintenance at the rate of 16% of his gross weekly income = £61.44 per week.

Victoria has a gross annual income of £80,000 or £1538 per week. Her net annual income is £52,682 or £1013 per week. She has two children who live with her former partner, Brian. Victoria is not entitled to any deductions to her child maintenance payments.

• Under the current system, Victoria must pay child maintenance at the rate of 20% of her net weekly income = £202.60 per week;
• Under the new system, Victoria must pay child maintenance at the rate of 16% of her gross weekly income up to £800 = £128 and 12% of the balance of £738 = £88.56. Her total child maintenance is therefore £216.56 per week.

The impact of the new system on NRPs with a gross income below £800 per week is therefore rather minimal. In most cases there will only be a small increase in the amount paid. For NRPs earning a gross income above £800 per week, the increase in the amount paid will be more significant. Victoria’s example shows that under the current system she would pay child maintenance of £10,535 each year. Under the new system she would pay £11,261 each year, an increase of £726.

Why change the system at all?

Given the limited impact that the new system will have on the amounts that NRPs will be expected to pay, it is well worth asking the above question. The answer, it seems, lies in a desire to improve the efficiency of the CSA itself whilst saving administration costs. Under the new scheme, the CSA will be able to contact HMRC directly and, so the theory goes, quickly obtain an individual’s PAYE data or tax returns. They can then make an assessment as to the child maintenance to be paid with less need to chase NRPs for documentation or information. Sounds wonderful, doesn’t it?

There are, inevitably, concerns that the new system will still produce unfairness. By placing such heavy reliance on data submitted to and accepted by HMRC, there is a risk. Self- employed NRPs may under-value their income. That under-valued income is accepted by HMRC and relied upon by the CSA in their calculations. What happens when the PWC, who strongly suspects that the NRP is under-valuing their income, complains to the CSA that they are being short-changed?

The CSA does not have the resources available to investigate whether the NRP has submitted accurate information regarding their income. The PWC may be left with contacting HMRC directly and asking them to investigate the NRP. Would HMRC do so? How do such investigations fit into their existing workload? The answers to these potential problems remain unknown.

Summary

First and foremost, the best way for child maintenance issues to be resolved between separated parents must remain that of agreement. Very few parents who have used the CSA or have been subjected to their assessment procedures will have anything complimentary to say about it. It seems unrealistic to expect that the new system will do anything to change years of criticism and frustration.

The eventual introduction of the new system to all persons using the CSA, both in existing cases and for new cases will take, we imagine, a matter of years rather than months. The two systems will therefore run in parallel for sometime to come. Parents who wish to resolve the issue of child maintenance should be aware of the new system and may wish to use it immediately as a calculation method for agreeing child maintenance. In time, the new system will become the norm.