Changes to the child support regime
Many will have heard in the news that the CSA (Child Support Agency) is to be scrapped and will be replaced by a new agency known as the CMEC (Child Maintenance Enforcement Commission).
Under the CSA a simple formula is used to calculate maintenance payments due from the non-resident parent (NRP). For example, for one child, the NRP would pay 15% of their net monthly income (that is their gross income after Income Tax, National Insurance and any pension contributions are deducted). For two children it increases to 20%, and for three or more 25%. Deductions are applicable for shared care arrangements where any child spends a given number of nights with the NRP. A minimum of one night a week on average throughout the year triggers a deduction. There are a limited number of other variations, including the NRP having other children living in their household or the child for whom child support is being paid having a disability or illness.
The CSA also caps the net weekly income to £2,000. If, therefore, the NRP earned more than that, the CSA would only base its calculation on £2,000, leaving the resident parent having to apply to court for a “top up”.
The CSA also do not deal with the issue of school fees.
The CMEC will use new rules for calculating maintenance and these are likely to be introduced sometime between now and 2011 (if they do not fall behind themselves as the CSA did). The aim of the new agency is for all cases to be dealt with under the new rules by 2013/14, although this timescale looks ambitious.
The new calculations will be based on a NRP’s gross income and will not take into consideration Income Tax, National Insurance or pension contributions! If the NRP earns £800 per week or less then they will pay 12% for one child, 16% for two children and 19% for three or more. If the NRP earns more than £800 gross per week they shall pay the 12%, 16% and 19% on the first £800. In addition, they will have to pay 9%, 12% or 15%, dependant on the number of children, on their income over £800.
Example
If an NRP was earning £30,000 per annum and had one child, they would have an approximate net income of £1885.33 less any pension contributions they might be making and, therefore, under the current rules, a child support assessment of £283 per month. Under the rules of the CMEC on same gross salary, the formula would be 12% of £2500, making an assessment of £300 per month. The net result is that an NRP will have to pay at least £216 more annually.
The big conundrum however is whether a NRP separating in 2010, and calculating the payments using the current CSA system, will find themselves presented with a new calculation under the CMEC three years from now.
Even the CSA are unable to answer this question at the moment. Having spoken to their general enquiries team they are not sure whether old cases will need to be reassessed. They did point out though that when they introduced the computer system and new calculations in 2003 it was impossible to take the old cases into account and they remained assessed on the old rules. The question is whether the government will allow the same mistake to happen again or whether the slate will be wiped clean and all cases dealt with on the new rules when they are introduced?
If you want to discuss the issues raised in this article further, please contact Debbie Lloyd or Ginny Colman on 01603 232300
The content of this article is for general information only. As always, specific professional advice should be taken on each individual matter.© Birketts LLP 2010. Solicitors regulated by the Solicitors Regulation Authority.