Is Child Maintenance assessed against capital as well as income?

When assessing what child maintenance one parent has to pay to the other then the Child Maintenance Service (known as the CMS) will refer to the Pay as You Earn tax information held by the HMRC tax office. That information confirms what salary the paying party has been paid for the previous tax year. 

The CMS will then apply their equations against that information and the result is the maintenance that has to be paid. 

This is an adequate process for many families but not for all. 

Lincoln based divorce lawyer, Neil Denny, was recently asked about the position where a paying parent had capital and was living upon that capital as opposed to earning income. 

In this situation, the standard CMS calculation against earned salary would be minimal. 

However, the receiving party can ask the Child Maintenance Service to take the capital wealth into account as well.  This is process is called applying for a "Variation Order"

If the paying party has capital in excess of £31,250 then the Child Maintenance Service can assume that the capital generates income equivalent to 8% of the value of the capital. 

Many, but not all, forms of capital are included. 

For example, capital tied up in the primary residence of the paying parent is exempt.  Other exempt classes of capital include;
•    some personal injury compensation payments; 
•    capital used in the course of the paying parent's trade or business; 
•    certain classes of capital that would need to be sold to pay the additional maintenance that was calculated on it and where the sale of that capital would then cause hardship to the child being supported or would otherwise be unreasonable. 

Receiving parents need to be aware of this provision and the ability to make a variation order. 

Paying parents need to be aware of their capital position and how this might impact on their maintenance liability whether they are subject to an application to the CMS or looking to negotiate child maintenance payments with their partner. 

For further information click here to read the Child Support TC (Miscellaneous Amendments) Regulations 2018. 

CONTACT US

If you would like any further advice regarding this, or any other family law matter, please contact Neil Denny on 
01522 551177 or neil.denny@chattertons.com.