Non-resident parents seem able to easily slip through the net and the endless bureaucracy and complicated formulas have created a system which seems to fail parents with care at every step.
So what is being done to alleviate this child maintenance headache? Well, the Government has now proposed a ‘radical’ overhaul to the current system with the establishment of the Child Maintenance and Enforcement Commission (CMEC). This commission will work at ‘arm’s length’ from the Government and will primarily encourage parents to make their own arrangements for child support. These proposals are currently working their way through the parliamentary process, with an expected date of introduction between 2010 and 2013. On current plans, the Government expects CMEC to accept new cases from 2010/11 and start moving existing cases across to the new system shortly after.
But are the changes really ‘radical’ or is it simply a re-hash of the old system? More importantly, will the new approach make any practical difference to the lives of parents with care or is it going to cause more confusion and greater problems? The outcome of these changes remains to be seen, but what is clear is that the new system’s success will ultimately be judged by the yardstick of effective maintenance collection and the extent to which it compels non resident parents to provide for the financial upkeep of their children.
So what are the key elements of CMEC?:
• First, parents with care who claim prescribed benefits will no longer have to use the CSA services for child support arrangements. Instead, they will be free to make their own private arrangements with the non resident parent and will not suffer a reduction in their benefits;
• The disregard (i.e. the amount of child maintenance that parents with care can keep without it affecting their benefits) is to be extended from £10.00 to £20.00. This will effect parents on both the new and old scheme from the end of 2008. At the same time, all child maintenance will be ignored when Housing Benefit and Council Tax Benefit are calculated. The “disregard” will double again to £40.00 for all parents with care on benefit in 2010.
• Child maintenance will be calculated on the gross income of the non resident parent;
• Percentage rates will be set at 12% for one child, 16% for two children and 19% for three or more children;
• The capped level for income will increase from £2000 per week to £3000 per week;
• Current flat rate amounts will increase from £5.00 per week to £7.00 per week;
• Deductions from Earnings Orders will be the primary method of collecting maintenance payments and not just used a last-resort method of enforcement. As long as a non resident parent is on PAYE, CMEC will be able to take the maintenance directly from their wages;
• One year fixed term payment schedules will be imposed, with variations to maintenance payable allowed only if a minimum 25% change in income is reported;
• Maintenance arrears will be enforced by way of a Regular Account Deductions Order, which is very similar to a Third Party Debt Order. Helpfully, this can also be used against non resident parents who are self employed and run their own businesses;
• CMEC will not in most cases have to obtain a Liability Order from the court before taking recovery action to pursue a debt. CMEC will introduce an administrative process to replace this system and enforcement and debt collection will be outsourced to Debt Collection Agencies.
In addition, further more radical and controversial methods have been proposed, in order to tighten up on non-compliant payers. Powers to confiscate passports are planned, alongside the introduction of curfews and tagging of non resident parents who have failed to pay maintenance. A “name and shame” programme has also been proposed which would make all non-payer’s details public.
But will these proposals really make any difference to maintenance collection or will CMEC simply be a sharper toothed CSA, which still fails to have any real bite? The proposals should be considered realistically and there will inevitably be loopholes and teething problems which parents with care should be alive to.
So what do you need to know?
Although maintenance is calculated on the basis of a non-resident parent’s gross salary, what comprises “salary” is not particularly clear. Bonuses and company cars can be considered as “salary” but only if evidence is given to prove their relevance. There is no duty upon a non resident parent to disclose such information, begging a question as to how parents with care will prove they exist.
Significantly, dividends are not taken into account as “salary” and this will inevitably cause confusion and problems where non resident parents are, for example, company directors and shareholders who take most of their income by way of dividend. In this case, the envisaged solution is for a parent with care to apply for a variation to ensure dividends are taken into account in the calculation of gross pay and the final child maintenance award. The timing of such a variation application is key and should be done within one month of receipt of the calculation to ensure maintenance can then be backdated.
A variation application will be a useful tool in the armoury of parents with care to ensure the correct calculation has been made. Indeed, a non resident parent who makes their living as a property developer is unlikely to have any regular income but may receive significant capital sums every couple of years or so. If that is the case, a variation application should be made to ensure the non resident parent’s true financial position is taken into account.
As a divorced parent with care, you may think the new CMEC system will not affect you because the amount and timing of child maintenance has been drawn up into a court order following divorce proceedings. This is not necessarily the case. It is crucial to remember that any court order for child maintenance made on dividing finances following divorce is only valid for 12 months: after that date, either party can apply for an assessment of child maintenance as the court will no longer have jurisdiction. For many people, private arrangements will suit them and they will not need to make such an application, but in situations where the non resident parent stops paying, an assessment by CMEC (or currently the CSA) will be necessary.
Certainly, many of the measures within the proposals for CMEC are to be welcomed and on paper the new system appears to provide the flexibility and support for parents with care who find it a constant uphill struggle to make the non resident parent contribute. Whether this so called ‘radical’ new approach also delivers in practice remains, however, to be seen. For now, parents with care should simply be alive to the changes; there may even be cause for a little optimism that the frustration engendered by the CSA may soon be a thing of the past.
With thanks to Bob Pape of Child Support Solutions.
Emma Flisher