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Child Support, Coronavirus and Changes in Circumstances

Jody Atkinson, barrister of St John’s Chambers, Bristol, explains the options available to parents receiving or paying child support whose financial circumstances may have been badly affected by the recent turmoil.

Jody Atkinson, barrister, St John's Chambers, Bristol


Jody Atkinson, barrister, St John's Chambers, Bristol

Receiving child support becomes even more important when times are hard, as unfortunately they are for so many people. On the other side, paying for child support becomes even more of an issue, when many paying parents have been placed on furlough, or have suffered reductions in the amount of income they receive.

I should start by pointing out that there has not been any emergency legislation specifically for child support in relation to the coronavirus. Instead the usual law in relation to how the child support system deals with changes of circumstances will continue to apply.

The child support system is administered by the Child Maintenance Service ('the CMS'), who are a part of the Department for Work and Pensions ('the DWP'). The DWP are responsible for administering most welfare benefits. As has widely been reported, there have been a huge number of new benefit claimants, and the DWP have had to put into place special measures to cope with the influx. It is reasonable to suppose that some of the staff that usually work on the CMS have been temporarily assigned to other duties, and others are self-isolating. Delays in administering the CMS system are to be expected. However, as will be seen, the date on which a paying parent (paying parents are called 'non-resident parents' by the CMS) notifies the CMS about a change in their circumstances is very important under child support law. That means that it remains vital that non-resident parents take care to notify the CMS about their income dropping as soon as they can. Even if it takes a long time for the CMS to process that information, due to a backlog of work developing, it will be the date that the contact was made by the parent that matters!

Paying (non-resident) parents who forget to tell the CMS that their income has dropped may find that they end up paying a lot more child support than they should have done as a result. If they end up in arrears as a result of falling behind in payments, it may be too late to do anything about it.  
I have also set out below actions that a receiving parent (called a 'person with care' by the CMS) can take if their maintenance payments stop, or if their ex-partner makes a false claim in relation to their income changing.

Child support for paying parents

One of the features of the current child support system is that the CMS are able to obtain information about non-resident parents directly from Her Majesty's Revenue and Customs ('HMRC'). This means that now, rather than asking the non-resident parent to tell them what their income is, the CMS usually rely on the information that HMRC provide.

Where a non-resident parent files a self-assessment tax return, as a self-employed person will do, then HMRC will provide the most recent tax return figure to the CMS. Where a non-resident parent is an employee, then HMRC will provide the CMS with the figures filed with them by that person's employer, under the Pay As You Earn scheme ('PAYE').

The CMS refer to the information provided by HMRC as 'historic income' and this can be a very accurate description! For self-employed people, the information provided by HMRC will inevitably be a year or so out of date, due to the fact that self-assessment tax returns are not due until the January after the end of each financial year.

The CMS conduct an automatic annual review of each case on the anniversary of the case starting. This involves the CMS contacting HMRC again to obtain the most recent tax return or PAYE information that HMRC have on their records. The CMS will then write to both parents and tell them what the child support liability will be for the next year. This is why, if you have a child support case, you will have noticed that the CMS write to you every year at around the same time. It is important that you find this letter, as this will tell you what income the CMS have used to calculate the maintenance that should be paid.

Child support law uses the week as its basic unit. The non-resident parent's gross (pre-tax) weekly income is used to calculate maintenance, and the amount that has to be paid will be calculated as a weekly amount. The annual review will show the gross weekly income that the CMS used (ie. £500 per week for someone who earns £26,071 gross per year).

In ordinary times the fact that historic figures are used does not matter a great deal, as the non-resident parent's income usually will not fluctuate that much year to year, and any changes will work their way through the system due to the annual review. However, we do not live in ordinary times.

If no steps are taken to notify the CMS, then the rate of child support will not change in between annual reviews, and the liability to pay child support at the rate calculated at the last annual review will continue to mount up.

Furthermore, even when the next annual review takes place, that will also be based on 'historic' information provided by HMRC. If somebody has recently lost their job, suffered a dramatic drop in salary, or their self-employed business has failed, this information probably has not filtered through to HMRC yet. This means that when the CMS carry out their annual review, the information that HMRC provide them with is likely to reflect the situation prior to the salary cut, or the business failure. 

Fortunately, the child support system does have a way of dealing with dramatic changes in circumstances, but as will be seen it is not perfect.

It is open to a non-resident parent to request that the CMS assess them based on their 'current' income, rather than their 'historic' income provided by HMRC. However, this can only be done where their 'current' income is at least 25 per cent less than the 'historic' gross weekly income that HMRC have provided. This means that a person who was being assessed on the basis of a historic gross weekly income figure of £500 per week provided by HMRC, would need to show that their current income had fallen to £375 or below before the CMS would be able to reduce their liability. If they were still receiving gross weekly income of £400, then the drop would not be sufficient under the CMS regulations to justify using 'current income' and the CMS would continue to assess them at the rate of £500 per week up until their next annual review.  

It is also very important to note that the CMS will only change a child support liability onto the current income basis from the date on which the non-resident parent notified the CMS that their income had fallen. The CMS cannot usually backdate the change in child support liability to the date on which the change in income occurred. This can produce some very unfair results and is why it is so important to notify the CMS as soon as possible.

For example, if you lose your job in April 2020, cannot find a new job and stop paying child support, but you do not tell the CMS about your job loss until October 2020 when they write to you about the child support you now owe, your maintenance calculation will only be changed with effect from October 2020, meaning that you will still owe six months of arrears of child support for the period April to October. There is very little that can be done to get rid of those arrears, and they will have to be paid at some point in the future.

That is why it is important to notify the CMS, even if the CMS cannot process the change for many months, because notifying them should stop the accumulation of arrears of maintenance.  

For employed people, if there has been a change in their income, they will need to provide their most recent payslips to the CMS, showing their new lower income. If they have been placed on the government's furlough scheme, then they will usually be in receipt of 80 per cent of their ordinary gross salary. As set out above, current income will only be used in place of the 'historic' figure provided by HMRC, where it is 75 per cent or less of the HMRC figure. That means that most people on furlough will not be entitled to an immediate reduction in the child support that they pay, because the reduction falls short of the amount required to go onto the 'current income' basis.  However, many people who have been placed on furlough will have lost overtime and other elements of their usual pay cheque, meaning that they might well be actually receiving less than 75 per cent of the figure that the CMS are using. That is why it is so important to check the figure on the last annual review letter.

It is also possible for self-employed people to be assessed on their 'current' income, but it is slightly more complicated than with employed people. Unfortunately, the way that the CMS work out 'current' income for self-employed people will not help in most cases where coronavirus has caused a sudden drop in earnings (short of a cessation of trading).

As set out above, the default position is that self-employed people are assessed on their most recent tax return that they have submitted to HMRC. Accounting periods vary, but as at the date of writing (September 2020), the information that HMRC would have for most self-employed people would be in relation to their year ending 5 April 2019 tax return.

If a self-employed person wants to be assessed on the basis of their current income, then they will need to provide the CMS with their accounts for a tax year that is more recent than the tax year for which HMRC have already provided 'historic information'. If their self -mployed earnings are 25 per cent less than the historic figure, then the CMS can use that figure instead. If they are not, then their maintenance will continue at the same rate up until their next annual review. However, there needs to be a completed tax year of accounts, it is not possible to simply state that your month by month income has gone down. 

This option will be of little benefit to most self-employed parents, since their most recent completed tax year will not reflect the dire straits that they currently find themselves in. As said, for most self-employed people, the most recent information that HMRC has will be their tax return for the year ending 5 April 2019. The tax return for year ending 5 April 2020 is not due until 31 January 2021, and so most self employed people will not have had their accounts drawn up yet. 

It is open to them to have the accounts for year ending 5 April 2020 drawn up now, and send them to the CMS and asked to be assessed based on these accounts, rather than the year ending 5 April 2019 accounts.  However, the year ending 5 April 2020 accounts will only contain a couple of weeks of trading that were damaged by coronavirus. The earnings may even be higher than those for the years ending in 2018 or 2019 that have already been filed with HMRC, and that the CMS are using to assess child support. The downturn income will only appear in the year ending 5 April 2021 accounts, but those are not available yet, because that year has not yet finished. There are two solutions available.

If a self-employed person has ceased to carry on their trade or profession, then the CMS should assess them on the basis that their income is nil (and therefore their child maintenance calculation should be changed to nil from the date that they reported the business' trade ceasing). That means that if the non-resident parent has stopped self-employed business entirely (even if it is hoped to resume it in due course), then the CMS should reduce that parent's child support liability to nil. However, this can only happen if notification is sent to the CMS; until it is, liability under the pre-existing maintenance calculation will continue to build up. If the CMS refuse to change the maintenance calculation, then the non-resident parent will have the right to appeal to an independent tribunal (and I can foresee a number of appeals about whether self-employed businesses actually ceased trading or not).

Another route that is available to both self-employed and employed persons is to claim a welfare benefit. If the non-resident parent claims certain welfare benefits, then he or she should be moved onto the 'flat rate' of £7 per week. Unlike changes which are reported by the parents themselves, where a welfare benefit is claimed, then the change in the recipient's child support liability should be backdated to the date on which they began to receive the benefit. Although the CMS system is run by the DWP, the recipient of the benefit will still need to inform them for them to process this change.
Benefits that will result in the flat rate include jobseeker's allowance, employment support allowance and state pension credit. A non-resident parent receiving universal credit should be put on the £7 flat rate of child support on if universal credit is paid on the basis that they do not have any earned income.

Universal credit rules have been changed by some emergency legislation, which means that it should be easier for self-employed people to claim universal credit. Child support is another good reason for self-employed people whose business has dried up to investigate this and make a claim if appropriate.

Child support for receiving parents (persons with care)

Receiving the correct amount of child support will be a matter of survival for many families, and, just as with paying parents, there are actions that receiving parents (whom the CMS calls 'persons with care') can and should take to make sure that they receive the child support that they are entitled to.

The first thing is to ensure is that there is actually a child support calculation in place. Many parents have used the CMS's website to calculate the amount of child support that should be paid, and then paid that amount. Some mistakenly think that this is a child support calculation that can then be enforced. It is not, and the CMS will only enforce a calculation where there is an active case with them. The person with care will know if this is their situation, as they will be receiving (at least) annual letters from the CMS as part of the annual review system that I explained above. No letters from the CMS – no case. 

To have the CMS calculate child support in a way that is actually enforceable, it is necessary to contact them. There is a one-off application fee of £20 (this was put in place simply to discourage applicants and can be waived in certain circumstances, such as domestic violence). The enforceable child support liability will start only from the date on which the CMS writes to the non-resident parent. It cannot be backdated, so if voluntary child support payments have stopped, the person with care will need to act quickly.

If the person with care has a case open with the CMS and payments have stopped, there is something they can do. All CMS cases are designated as either a 'pay direct' or a 'collect and pay' case. Most cases are 'pay direct'; this is where the non-resident parent pays the person with care directly themselves (eg. by standing order). The CMS do not keep a record of how much is paid in pay direct cases; they just send out the annual letters saying what payments should be made. This means that the CMS will not know if the non-resident parent stops paying, until they are told. 

If the non-resident parent has stopped paying, then the person with care needs to contact the CMS and tell them so. They should consider asking the CMS to move them onto 'collect and pay'. This is where the child support will be paid by the non-resident parent via the CMS, then onto the person with care.

The CMS charge collection fees for cases which are designated as 'collect and pay'. They will charge the non-resident parent 20 per cent of the amount collected, and the person with care 4 per cent of the amount collected. The reason why both parents are charged is to encourage parents to resolve matters between themselves, stay on 'pay direct', and most importantly from the government's perspective reduce the work that the CMS have to do.

The CMS will not enforce child support arrears until a case moves onto 'collect and pay' and can be reluctant to enforce arrears that arose before the case switched, as it is difficult for them to be sure whether the maintenance was paid, or not. That means that if a parent with care is on pay direct and their ex-partner stops paying, and it is not possible for them to resolve matters, then they will want to seriously consider asking the CMS to move you onto 'collect and pay', notwithstanding the 4 per cent collection charge.

The CMS have a wide variety of enforcement powers available to them, including deducting money directly from bank accounts, and deductions directly from pay cheques. The only cost to the receiving parent will be the 4 per cent collection charge.

I have explained above how the CMS treat requests by a paying parent for their maintenance calculation to be changed due to a drop in their income. The receiving person with care will be notified by the CMS of any decision to change the amount of maintenance payable. The person with care has 30 days from the date of the CMS's letter (note not the date it arrives) to contact the CMS if they want to dispute the CMS's decision. Like all CMS time limits it is very important to notify the CMS within the time limit, otherwise the right to appeal may be lost. After an internal CMS review (known as 'mandatory reconsideration'), an appeal lies to an independent tribunal, who will look at the whole decision again, and in much more detail than the CMS usually will. As I said above, I can foresee a lot of appeals about whether a non-resident parent really has stopped trading or not.

The CMS system is usually flexible enough to ensure that those parents who try to work the system get found out. However, it relies on the other parent to contest the issue – if the person with care does not take any action, then the CMS will usually assume that they accept whatever the non-resident parent is saying. Often contesting the issue will involve the person with care 'applying for a variation'. This enables the CMS or a tribunal to take a wider look at a case. So, for example, if a non-resident parent was running a business and decided not to pay themselves any income, due to the coronavirus, but continued to pay a salary to their new partner who was employed by the business, then the person with care could apply for a variation on the grounds of 'diversion of income'. This would enable the CMS to take the salary paid to the new partner into account when calculating the amount of maintenance that should be paid.

Another ground of variation can be used where a person is paying the flat rate due to receiving a welfare benefit, but is still receiving an income. That might be seeing some more use due to the number of self-employed people who will now be receiving welfare benefits. Finally, there is the assets ground of variation, which allows the CMS to assign a notional income to the non-resident parent's assets. That might be seeing more use in an environment where a lot more people will be living off their assets. Assets, however, are a topic deserving their own article, which I will be publishing in the near future.