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Gross Income Scheme FAQ
Gross Income Scheme
Frequently Asked Questions
New child maintenance legislation provides a greater opportunity for parents to make their own private arrangements for child support. A new Statutory Scheme, which we have referred to as CS3, will be available for parents who do not wish to engage in a private arrangement. CS3 now manages all new applications, and all existing cases will transfer to CS3 over the next few years.
How Do I make an application to CS3?
You must discuss your options with CM Options. If after this discussion you wish to apply to the CS3 scheme, you will need to pay the application fee (unless you are exempt) and a reference number will be issued. This reference number must be given to the new Child Maintenance Service.
Who are Child Maintenance Service (CMS)?
This is the new name for the Child Support Agency. It is the department that will oversee the administration and management of the statutory scheme of child support. CMS is a department of the Department of Works and Pensions.
Who can apply to CS3?
The Receiving Parent (previously known as PWC) will usually take the lead as it will be in their interests to safeguard ongoing maintenance payments, but the Paying Parent (previously known as NRP) may take the steps to apply if desired. The first application will take priority.
How is CS3 different to previous schemes?
The calculation process for CS3 is very similar to the process used in CS2 but will use the Gross Income of the Paying Parent as opposed to Net Income. Other noticeable changes include different percentage rates for both Relevant and Qualifying children, a two tier percentage for income above and below £800pw, charges* are applicable in some cases and changes have been made to the variation scheme. For more information about the CS3 scheme please click here
What is Gross Income?
Gross income is the earnings received before any deductions for tax and national insurance are made. Pension contributions will be allowed and will be deducted before the calculation of maintenance is completed. It is important for Paying Parents to notify CMS of any private pension payments made. Gross Income will consist of any earnings, trading income or pension income (excluding state pension). Self employed earnings will be determined by the gross profits of the trade, or appropriate share of any partnership.
Income will be sourced directly from HMRC rather than asking the Paying Parent to provide the details. Maintenance will be calculated on the latest income information registered, which could be anything upto the last 6 years tax return information held.
Tax Credits no longer feature as income for maintenance calculation.
What if the income is different to last years income?
CMS will use Historical Income provided by HMRC by default. If you believe the historical income is no longer reflective of your average earnings you must report this to CMS immediately. Providing the current income differs by more than 25%, the maintenance will be calculated on Current Income and not Historical Income.
Maintenance calculations based on current income are legally obliged to report any increase to the income, providing any such increase is equal to or greater than 25%
HMRC will not have correct income information - what can I do?
If the information held with HMRC is non existent or deemed unreliable, legislation allows the calculation of maintenance to be based on Estimated Earnings. This will look at the average salary for a particular profession in a particular region. If you are the Receiving Parent and you believe the information used in the calculation of maintenance is inaccurate, you must communicate these concerns with CMS with a view to using estimated earnings instead. If you are a Paying Parent, do be aware that the use of Estimated Earnings is a legitimate process if other information is unreliable. It is important that you communicate with CMS to provide verification of your actual earnings.
Are Dividends included as Income?
Dividends are not considered 'earnings' and are therefore not subject to inclusion within the standard calculation. However, dividends can be included under the Variation Scheme. Other Unearned Income, such as Rental Income can also be included within the grounds of a variation application.
What charges will be made for CS3?
Charges are not yet a part of the CS3 scheme, but will be introduced in 2014, subject to Government approval. Applicants to CS3 will pay an initial application fee of £20 but should the case be managed by CMS under the "collect and pay" service, parents will also face charges of 20% (for Paying Parent) and 4% (for the Receiving Parent) of any maintenance paid.
The Collect and Pay charges can be avoided if parents opt for the Direct Pay service. This allows the calculation of maintenance to be completed by CMS, but payments will be made directly from one parent to the other. Unlike the similar "Maintenance Direct" scheme on CS2, Direct Pay does not require the consent of both parents. The Direct Pay service will be the default option and collect and pay service will only become applicable if the Paying Parent fails to maintain regular payments
I don't want any contact with my ex partner - do I have to use Direct Pay?
You can still arrange to have Direct Payments, but this can be managed through a Non Geographical bank account. Our investigations indicate few banks are aware of these type of accounts, which have generic sort code details thereby protecting the locality of either party. However, we are reassured by CMS that such accounts will be available by the time charges are introduced.
I want to pay directly, but my ex refuses - what can I do?
Direct Pay will be the default method of payment, and Receiving Parents can no longer veto such an offer. Legislation prevents CMS from allowing a collect and pay service without sufficient evidence that the Paying Parent is not maintaining the payments appropriately. A case transferred to Collect and Pay service will remain on this service for a period of time, but will then be given the opportunity to return to the Direct Pay option. Collect and Pay service is designed to be a temporary measure.
The decision to adminster a case under Direct Pay will not rely on historical records of payments. Compliance tests will be applicable for cases moving from existing CS1/CS2 schemes to CS3, and may possibly feature in the management of cases moving between Collect and Pay and Direct Pay during the lifetime of the case.
I am a full time student - will I have to pay?
Under CS3, there will be no automatic nil calculation for students. Maintenance will be assessed according to income or benefits that you receive.
I already have a CSA case, will CS3 apply to me?
From 2014, all existing cases from both CS1 and CS2 groups will be closed and parents will need to discuss their options for future maintenance. Until your case is set for closure, you will remain on the existing scheme for child support.
Prior to the charges program being introduced, existing NRPs who are named in a new CS3 application will have their existing case closed and automatically transferred to the CS3 scheme. This is known as Reactive Transition. Reative migration may also apply if both the Paying Parent and their partner are NRPs and either of them receive certain benefits. More details of Reactive Transition can be found here
I have had a letter telling me that my case is going to close, what do I do?
All existing cases will be closed during a program of case closures between 2014 - 2018. Unless the case is closed through Reactive Transition, you will receive notification 6 months in advance of the case closure date. A reminder letter will be sent one month prior to the closure date, but no further contact will be made. Your existing case will close on the date as specified and CSA will not collect maintenance after that time UNLESS a new application is made under CS3.
What options do I have once my case is closed?
There are 4 main options:
- Family Based Arrangement
- Consent Order/Minute of Agreement (Scotland)
- No Maintenance Arrangements
- CS3 application
For more details of these options click here
What happens to my arrears if I do not make a new application?
No further payments will be made for regular maintenance. Although there is little confirmed information, we understand that a Receiving Parent who does not make a new application to CS3 will have to make a specific request for any outstanding arrears to be collected. If no request is made, the CSA will assume an arrangement has been made for the repayment of these arrears too.