The Child Maintenance (Assessment of Parents’ Income) Bill 2017-19

29 / 11 / 2017

The Child Maintenance (Assessment of Parents’ Income) Bill 2017-19 had its first reading in the House of Commons on 28 November 2017.

It is a private member’s Bill with its summary describing it as “A Bill to equalise the assessment and enforcement of child maintenance arrangements of children of self-employed parents with those of children of other employed parents; and for connected purposes”.

Heidi Allen (a Conservative MP for Cambridgeshire) explained that ” The aim of the Bill is to ensure that the parents and children who find it hardest to be awarded a fair child maintenance arrangement are better supported by a system with proper teeth. Whether paying parents have complex finances, are hiding their true incomes to avoid tax or are simply determined not to pay maintenance, this Bill is for them”.

She continued that “When parents split up, the Child Maintenance Service can help them to work out a fair payment schedule for their children. When the split is amicable and sensible, the system works well, but if paying parents want to avoid paying, they can do so all too easily—and all too often—by hiding behind self-employed status. By hiding their income, they are not only denying their children the financial support that they deserve, but defrauding Her Majesty’s Revenue and Customs, and, in many cases, forcing the parents with care on to benefits. That is a double hit to the taxpayer. The country loses out on tax, and instead pays out to support the receiving parents. The purpose of the Bill is to ensure that the statutory child maintenance system works for as many families as possible by closing that loophole.

The Child Maintenance Service, which was introduced recently by the Department for Work and Pensions, replaced the old Child Support Agency. In straightforward cases involving a traditionally employed paying parent, it works well. A standard child maintenance calculation under the CMS is based on HMRC’s “gross taxable income” data. That usually means gross earnings from employment or self-employment, with pension contributions deducted. However, the system does not work when the paying parent takes income in other ways—unearned income from, for instance, trusts, dividends, rental income, individual savings accounts, assets, or capital gains from property sales: essentially, any income that does not show up on HMRC records”.

Thee Child Maintenance Service,  referred to above, was introduced in 2012 to deal with child maintenance, which was at that time dealt with by the Child Support Agency. Following the introduction of the Child Maintenance Service, many of the Child Support Agency cases have now been closed and the remainder are expected to be closed by 2018.

Under the new Child Maintenance Service rules, a paying parent’s income can no longer be challenged on the ground of “lifestyle incompatible with earnings”, whereas, the ability to challenge a paying parent’s income on that basis was previously a feature of the old Child Support Agency rules. It is apparent that the change in the rules in this regard  can be seen as a clear disadvantage for some parents receiving child maintenance through the Child Maintenance Service.

At the recent first reading in the House of Commons, the Members agreed that the Bill could have a second reading, which is scheduled to take place on 23 February 2018.