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CMS and notional income

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NewcastleBrownAle

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so, the CMS can take 8% of assets over 31250 as unearned income. So here where confusion sets in.

Say you have acquired an asset ( e.g. tax free pension lump sum) for 200,000 and immediately use the money to pay off a debt ( e.g. mortgage).

simple example.

how would the CMS see this ? how would it affect payments?
 
So I've spun the question; Can the UK Child Maintenance Service take my tax free pension lump sum as a child support payment through a couple of AI ChatBots, because a generic Google search deosn't seem to yield much, and this is what was returned.

"According to a post on DAD.info Forum, the UK Child Maintenance Service does not include tax-free income from pensions, such as tax-free pension lump sums, in the calculation of child maintenance payments. The calculation is based on earned income that is subject to tax by the HMRC "

"The UK Child Maintenance Service (CMS) primarily calculates child maintenance based on the taxable gross income of the non-residential parent. However, they consider various factors, and it's important to note that rules and policies can change. Therefore, it's advisable to check the most recent and specific regulations.

Lump-sum payments, such as tax-free pension lump sums, may not be considered as income for child maintenance purposes. Typically, child maintenance calculations in the UK focus on regular income, such as earnings and certain benefits."

In the legislation which Child Support is based: "The Child Support Maintenance Calculation Regulations 2012"

It states clearly in the legislation that only income that is taxable in one form or another is taken into account for the child maintenance assessment. So unless CMS Regualations have changed, tax free pension withdrawals are not included in the assessment for child maintenance, is what I am seeing.
 
problem is the rules changed a few months ago, and that all assets over 31k can be used. The big question is what if you dispose of them immediately to pay off a debt. I have 150k about to mature as a tax free pension lump sum and plan to immediately use it to pay of my mortgage , what happens then?
 
If the lump sum ceases to be a lump sum because you pay off your mortgage. The money won't be there anymore to calculate against!!


From another forum:

"Some months ago I phoned the CMS to ask the same question and the call taker had no idea. She didn't even know what a tax free pension sum was, never heard of it.

So I wrote to them. 3 months later still no reply. So I logged into their portal and messaged my question. Eventually got a written reply stating they had no idea, couldn't advise me but would pass my enquiry into their policy/legal team to answer. And no surprise to me, none of the so called legal policy experts know either. Utter disgrace.

So I contacted HMRC and guess what.....they don't know either. Told me to contact CMS !!!!! Both depts are an utter joke. No one there has a clue about the job they're paid to do.

So my next step is ask my MP to contact the head clown who is in charge at the CMS and try to get a proper answer."

Under the current 2012 scheme, a person with care can seek a variation if they believe the non-resident parent has additional income, including “unearned income” of £2,500 a year or more or, since December 2018, “notional income” where the non-resident parent has a one or more non-income yielding assets each worth more than £31,250. Additional grounds include the diversion of income, or where the non-resident parent is on the nil or flat rate of child maintenance (in certain cases) but has gross weekly income in excess of £100.
 
seems like no-one knows. I get the feeling that the CMS is run by bitter people who see the paying parent as the reason for the break up and are feckless and irresponsible and then use the CMS as a means for life long punishment. This is starting to feel like the post office scandal, where lives were ruined, but the organisation maintains that everything is fair, consistent and unquestionable. So CMS ,,,,,Horizon version 2?
 
my view- surely a non taxable asset that you immediately dispose of, to pay a debt, shouldn't be notional income, but the CMS seems to be a law into itself.
 
NewcastleBrownAle said:
seems like no-one knows. I get the feeling that the CMS is run by bitter people who see the paying parent as the reason for the break up and are feckless and irresponsible and then use the CMS as a means for life long punishment. This is starting to feel like the post office scandal, where lives were ruined, but the organisation maintains that everything is fair, consistent and unquestionable. So CMS ,,,,,Horizon version 2?
Click to expand...
It's civil servants so shoddy service expected.
Another one that's under resourced and uses flowcharts as guidance.
 
NewcastleBrownAle said:
problem is the rules changed a few months ago, and that all assets over 31k can be used. The big question is what if you dispose of them immediately to pay off a debt. I have 150k about to mature as a tax free pension lump sum and plan to immediately use it to pay of my mortgage , what happens then?
Click to expand...
Question, how are you getting 150 lump sum tax free? Reason I'm asking my works pension state anything 30k or under is tax free and taxed on amount above that

I'm also sure that based on 150k only the first 25% is tax free,75% is then taxed accordingly. Correct me if I'm wrong.
 
I was told many years ago (by the CMS!) - if you have any capital - put it into property. It's only savings in the bank that are assessed. That might have changed.
 
NewcastleBrownAle said:
so, the CMS can take 8% of assets over 31250 as unearned income. So here where confusion sets in.

Say you have acquired an asset ( e.g. tax free pension lump sum) for 200,000 and immediately use the money to pay off a debt ( e.g. mortgage).

simple example.

how would the CMS see this ? how would it affect payments?
Click to expand...
As far as I am aware, a tax free pension would not count, regardless of what you did with the money. If you've used it to pay off a debt then, as mentioned above, it's not even there to be assessed!
 
It really depends if the money is classed as income. If it classed as income CM is due.

Having said that if the money is in addition to your regular income and is not mentioned to HMRC (because you are not required to) then it will only be looked at if your ex request it to be look at. If it is classed as income and your ex don't know then you will probably be in the clear.

It would probably be best to spend a little money and speak to an accountant
 
Just bumping this thread. Has anyone come across this situation where they've been assessed on their capital?

For example, the old family home is sold. NRP receives 40k. With savings and amounts being saved for kids say this takes total cash in bank to 60k.

Reading online it appears the 60k could be assessed as capital and 8% of that added to income for the tax year for an increased CM payment.

If that happens and then say you put 30k into your new home so below the capital threshold for the next year would it mean no such assessment in a future year?

It appears would only be an issue if the RP makes a claim in the first place. Just wondering if this has actually happened to anyone.
 
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I don't know. Capital would be assessed if it wasn't tied up in property I think - I believe the capital limit now is about 30k - need to check that out ....
 
Information here - rules changed in 2018

"Where the Father’s capital exceeds £31,250 then a notional income of 8% of the value can be ascribed to him."

A lot more info on this link too

osborneslaw.com

Child Maintenance: When is capital, income?

Reading a recent case from the Child Maintenance Tribunal, I considered it worth flagging up that the Child Maintenance Rules changed in 2018, regarding
osborneslaw.com osborneslaw.com
 
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