North East’s leading specialist children lawyer, Lucinda Connell states new child maintenance regulations which came into force on 30th June 2014 mean that most parents making a new application to the CMS (the Child Maintenance Service which has replaced the Child Support Agency) will have to pay a £20 application fee. This has led to concerns that single parent families will be penalised by new rules on child maintenance payments and that the new rules shall hurt those people who need the service most.
If the CMS continues to act as a go-between for parents to collect child maintenance payments, a 20% administration fee will be added to every amount collected. This means that for every £100 assessed, the non-resident paying parent will actually have to hand over £120. From this sum, the Government takes an administration fee of £24, leaving only £96 for the receiving parent. To avoid the charges, parents can make their own private agreements or use the CMS service only to determine the level of maintenance. If they then set up ‘Direct Pay’ arrangements to their former spouse or partner, no administration fee shall be charged.
The new rules encourage parents to take responsibility over financial arrangements for their children. The administration charges can be avoided by private child maintenance agreements being entered into and maintenance instalments being paid on time. However, in practice, the paying parent sometimes, or often, fails to make regular payments to support their children and this can be for a considerable variety of reasons. Many paying parents struggle financially following a relationship breakdown and the new rules potentially make the task of supporting their children more difficult. This has the knock on effect of the other parent with the care of the children also suffering. They will receive less maintenance and are effectively being penalised for a situation over which they have no control.
So how is child maintenance liability calculated under the new rules?
The old ‘net income’ scheme essentially provided for the paying parent to pay 15% of net income for 1 child, 20% for 2 children or 25% of net income for 3 or more children. The primary change implemented by the new rules is that the basic formula is now based on the non resident (paying) parent’s gross income. Due to the incidence of higher rate taxation, the formula is not as simple or memorable as the net income formula. For gross income of under £800 per week the non resident parent pays 12%, 16% or 19 % of their gross pay to the person with care of the qualifying children as child support, depending on whether there are 1, 2 or 3 or more children. For gross income from £800 up to the cap of £3,000 the liability is 9%, 12%, or 15 %. Generally, this will produce a broadly similar figure to the liability under the net income scheme. However, the intention is that there should be a small increase and the government estimates that 50% of cases will see an increase of at least £5 per week if transitioned onto the gross income scheme.
Existing net income (and old rules) cases will continue to be administered under their present schemes for the time being. However, the government plans to close all net income cases by the end of 2017. There is no plan for an automatic transition to the gross income scheme; parents who wish to continue using the CSA will have to re-apply. They will then become gross income cases, and the new application fee and collection charges will apply to them. The Government is giving people registered on the new CMS system just over a month to opt into the new scheme and clear any arrears. However if non-resident parents still choose to use the CMS’s ‘Collect and Pay’ service or fail to settle arrears, the new fee will be added to every maintenance payment.