Child Maintenance Gross Income Scheme
All CSA cases are closing. By 2017/2018 there will be just one scheme to calculate child maintenance, all administered by Child Maintenance Service (CMS).
Child maintenance decisions will now calculated against the Gross Income of the Paying Parent, which is the income paid before any deductions for tax and national insurance. Tax credits are no longer included as income
The process for calculation still relies on a percentage of the Paying Parent's income, but there are many differences between this, and the previous CS1 and CS2 calculation schemes. In many cases, child maintenance payments are increasing significantly.
The Gross Income scheme heavily promotes and encourages parents to make their own arrangements for child maintenance, which is welcomed by many groups. However, not all separated parents are able to make amicable arrangements for the financial provision of their children, and there remains a Statutory Scheme to arrange child maintenance where necessary.
There is an application fee payable, and other charges may be applied if CMS have to become involved in the collection of maintenance payments. Those under the age of 18 or who have at some stage reported Domestic Violence will be exempt from the application fee, and will be fast tracked onto Gross Income Scheme.
The Gross Income scheme operates on a two tier rate system, with one set of percentages applied to the first £800pw income, and additional rates applicable to income in excess of £800pw. The calculation rates under the Gross Income scheme are lower than the previous schemes to recognise the use of gross income and not net income. Reductions for pension contributions are allowable, although it is important to notify CMS of any private pension contributions made. Shared care allowances also continue to apply as before. However, if parents now share the care of the child/ren to an absolute equal extent, there can be no application for maintenance at all. For more details see our page Equal Shared Care
Although CMS may calculate the maintenance liability, using income information sourced directly from HMRC, the default payment method will be Direct Pay. This means the Receiving Parent must provide details of the bank account in which the maintenance is to be paid. Failure to provide bank details may result in no maintenance being received. A Receiving Parent cannot refuse to accept Direct Payment from the outset*.
If the Paying Parent fails to make the payment directly to the Receiving Parent, the case may be moved to the Collect and Pay service, which will involve further charges. Whilst the Receiving Parent may see a small reduction at just 4% of any maintenance received, the Paying Parent will be subject to a massive 20% charge on top of the maintenance charge. These fees can soon spiral out of control and quickly accrue as additional arrears.
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*Certain CSA cases that were subject to enforcement action at the point of case closure, may be subject to collect and pay fees from the initial CMS decision.