A blunt instrument: the child maintenance system

The current child maintenance formula has the virtue of simplicity, particularly compared to the previous incarnation which was so complicated that solicitors needed specialist software to be able to calculate the figure correctly. However, this simplicity comes at a price; it doesn’t always achieve fairness or meet the parent’s needs.

Once upon a time, before the Child Support Agency was created in 1993, parents who could not agree how much child maintenance should be paid were able to apply to the court for it to set the figure. The creation of the CSA took that ability away, save for cases where the paying parent (known as the non-resident parent or NRP) had a very high income and the court could make a topping up order for additional child maintenance or where the CSA had no jurisdiction (e.g. because the NRP  lived outside the UK). That affected only a small number of families; most people’s involvement with the court in relation to child maintenance was limited to agreeing a figure and asking the court to make an agreed order (a “consent order”) for that figure to be paid. If the figure wasn’t agreed, one parent had to apply to the CSA. Furthermore, where the parent receiving child maintenance was also claiming income support, he or she weren’t even able to do that; they had to use the CSA.

The CSA proved to be a disaster. It struggled to recover child support from NRPs or to pass it on the resident parent. By the time that it was replaced by the Child Maintenance Service in 2012, it had failed to recover £3.8 billion in child support arrears. The government abolished it, replacing it with the Child Maintenance Service.

The mirror flipped at this point. Instead of parents having to use a government agency to assess and collect child maintenance, particularly if they were claiming benefits, the new regime’s strategy was to actually deter parents from using the CMS. Parents were encouraged to reach an agreement direct. The CMS created an online child maintenance calculator that helped parents to calculate how much should be paid. If they couldn’t agree (or more usually, if one parent failed to pay what he or she should), then one of them could apply to the CMS for an assessment of how much should be paid.

Even then the CMS encouraged people to not use it any further. It only costs £20 to apply for a child maintenance assessment, but parents were encouraged to pay the child maintenance direct, rather than via the CMS, by the simple expedient of charging the NRP an extra 20% and the receiving parent a charge of 4% if payments were made through the CMS. This tends to be in cases where the NRP is not being co-operative. During the 2019/20 financial year, the CMS earned £41.54 million in revenue in this way.

A far simpler child maintenance formula was also introduced in 2003 and then revised in 2012. The child maintenance was calculated based on the NRP’s taxable income (i.e. gross income less pension contributions) and the CMS had access to the NRP’s tax records at HMRC so it could calculate it. The payment rates were fixed at 12% for one child, 16% if there are two children and 19% if there were three or more. If the NRP’s income is more than £41,600 per annum, then any income above that figure is assessed at 9% for one child, 12% if there are two children and 15% if there are three or more.

Although the formula was simple, it was controversial. The formula takes absolutely no account of the resident parent’s income; he or she could be a billionaire, but the NRP has to pay the same. The resident parent might be cohabiting with a new partner or have a new spouse, who might have a high income; that income is ignored too.

On the other hand, the NRP might start cohabiting with a new partner or remarry; the new partner/spouse’s income is ignored. Moreover, that new partner/spouse might have a child with the non-resident parent, entitling the NRP to a discount. The resident parent might feel somewhat aggrieved by that, believing that NRP’s first responsibility should be to the children of his or her previous relationship. They are likely to be even more aggrieved if that NRP’s new partner/spouse has children by a previous relationship who now live with the NRP; this entitles to the NRP to a discount too – even if the new partner/spouse is receiving child maintenance from that child’s other parent.

A further  complication arises from the NRP’s entitlement to a discount if children spend at least 52 nights a year with him or her. Therefore, if the children came to stay overnight every other weekend from Friday evening until Sunday evening, that parents would get a 1/7 discount. If the child stayed at least 104 nights per annum, there work be a 2/7 discount and if the children stayed at least 156 nights a year, there would be a 3/7 count. This was controversial because the receiving party would often feel that even if the kids were visiting their ex that weekend, the resident parent still had to meet the fixed costs of caring for the child; i.e. they still had to pay the mortgage for the nights when the children were away.

Furthermore, the formula states that if the children spend equal nights with each parent, the NRP receives a discount of 50% plus £7 per week per child, regardless of the fact that one parent might have a far higher income than the other. This might leave one parent with insufficient income to meet their and the children’s needs.

Where the parent is divorcing or already divorced, the court can address this problem by ordering the non-resident parent to pay spousal maintenance to the resident parent, provided that it has not already made an income clean break order. However, in a case involving unmarried parents, this is resolved so easily. The resident parent could in theory make an application to the court under financial provision for the children under the Children Act 1989, Schedule 1. However, such applications are rare and of course, there is no guarantee of success.

The discount for overnight stays causes complication in other disputes too. It is not unusual in cases involving disputes about child arrangements (i.e. about where the children live and how much time they spend with the other parent) for one parent to allege that the other parent’s motivation behind seeking more overnight stays is that he or she is doing solely to avoid having to apply child maintenance.

Separating couples should also be aware that while they are free to agree a different figure to what the CMS might assess, this does not prevent the CMS’ involvement in the future. Where the court makes a consent order for child maintenance in a divorce case, 12 months later either party can apply to the CMS for an assessment which will then overrule the child maintenance order. Similarly a mere informal agreement about child maintenance cannot exclude the CMS’ jurisdiction to make an assessment.

I have also encountered some non-resident parents who reached an agreement in their divorce with their ex that they would transfer the house outright to the resident parent, without receiving any compensation for their interest in the property, in return for not having to pay child maintenance, This is a very bad idea. I recall a husband who had agreed to do that and who had consented to the court making an order for the house to be transferred to this wife and for there to be a full clean break order so that neither of them could make any further financial claims against each other in the future. However, he didn’t appreciate that clean breaks are not possible in relation to child maintenance. To his horror, after the order had been made, his wife applied to the CMS for him to be assessed to pay child maintenance for hundreds of pounds every month. When he then consulted me, I had to advise him that there was probably nothing he could do about it, save perhaps for a highly speculative application to set aside the clean break order on the ground that he has been materially misled by his wife about her intentions; I had to advise him that I could not be confident such an application would have a reasonable chance of success.

The child maintenance system is not always as simple at it may appear, and it can have an impact on other financial or child arrangements issues. Seeking legal advice from a solicitor at an early stage is a good way to avoid these unexpected complications.

27 January 2024

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