As you are probably well aware, the Government has struggled to enforce child maintenance payments since time immemorial. This summer, the Department for Work and Pensions (DWP) has taken further steps towards coherent enforcement and has published its response to its own consultation seeking views on a new child maintenance compliance and arrears strategy. The Government has said that these changes, along with previously announced proposals to allow deductions from joint bank accounts, will be introduced during autumn 2018. These measures will complement the existing spectrum of collection and enforcement powers, which are currently employed by the Child Maintenance Service (CMS).
The first change relates to situations where the non-resident parent (NRP) has complex income or substantial assets. Unearned income will now be included in the initial calculation of child maintenance as well as calculating ‘notional’ income from non-income generating assets. Prior to this, an NRP might have had substantial capital, but if he had little income then he would pay very little child maintenance. Currently, when an application for child maintenance is first considered by the CMS, only the earned income of the NRP will be taken into account. The parent with care (PWC) can ask the CMS to consider unearned income by applying for a variation, but only after the initial calculation of child maintenance has been made. Under the new system, the onus will still be on the PWC to inform the CMS of the NRP’s unearned income. Regarding notional income, the DWP is to introduce a rate of interest of eight per cent to come up with presumed income for assets above a certain threshold. The new system still has its constraints as without access to the NRP’s financial affairs or where a significant amount of time may have elapsed since their separation, it may not always be straightforward for the PWC to supply this information.
The DWP has also been working with HMRC to consider further strategies to tackle avoidance in child maintenance cases with complex earners as this has long been considered to be one of the most significant points of weakness in the system. They are currently jointly exploring the additional information HMRC can make available to the DWP’s Financial Investigations Unit (FIU) to help assess the NRP’s income, such as self-assessment tax data for multiple tax years. They are also improving channels of communication between the FIU and HMRC’s Fraud Investigation Service (FIS), including a formal process for referring cases investigated by the FIU to FIS where there may be tax irregularities that require investigation. This follows on from the earlier announcement in December 2017 that there would be an increase in the number of staff in the Financial Investigations Unit (FIU) to ensure that maintenance is not being evaded.
Where there are arrears, the DWP will also be able to make deductions for ongoing maintenance from welfare benefits. Where the NRP is in receipt of Universal Credit and has earnings, a deduction will now be able to be made for ongoing maintenance direct from the Universal Credit. Deductions will also be possible from welfare benefits where arrears have accrued but ongoing child maintenance is no longer paid (at present no further payments can be taken once the child stops being eligible for child maintenance).
For NRPs not on benefits, there will also be a new measure to allow deductions from jointly-held private accounts and business accounts, subject to safeguards. At present, deductions from bank accounts are only allowed from bank accounts that are solely in the name of the NRP. This should stop NRPs from shifting funds into accounts from which deductions could not be made, in order to avoid having to make the payments.
Finally, as an ultimate measure, the DWP will also be able to remove passports from defaulting NRPs. However, it is estimated that only around 20 cases per year would result in an NRP’s passport being removed.
The DWP has concluded that it is to write off around £1.9 billion in historic Child Support Agency arrears, on the basis that it is highly unlikely that these arrears will ever be recovered. Whilst this is probably a pragmatic decision from a practical point of view, it will come as little comfort to the many whose long outstanding debt is being written off.
All in all, this would appear to be a very cohesive set of measures to tackle what has long been considered a national outrage for children of divorcing families.
If you have any questions about maintenance or any other family matter, you can call 01223 443333 and ask to make an appointment to speak with Tricia, Adam, Sue, Simon, Gail or Jeremy.