In December 2012, the Child Support Agency (CSA) began running a new gross income assessment scheme known as CS3 for a Pathfinder Group of applicants.
The aim is to simplify the assessment of child support payments for non-resident parents by using gross income rather than net income figures. Gross income figures can be sought directly from HMRC making it faster, more accurate and transparent, and helping to reduce administration costs.
The Pathfinder Group consists of families with four or more children having the same primary care and non-resident parents. Any pre-existing support payments under the CS2 net income scheme are combined under CS3 if parents qualify for the Pathfinder Group.
Continuation of CS2
The CSA will continue to accept applications under CS2 for any family not in the Pathfinder Group for a period of time. After a trial period, the new gross income framework will be extended to families with two or more children having the same primary care and non-resident parents.
Parents can expect delays in extension of the CS3 for several months due to legislative proceedings. It is unclear if existing applicants not falling into the Pathfinder Group will be rolled over into the CS3 scheme or if non-Pathfinder Group applicants currently in CS2 will stay in CS2. If the latter occurs, only new qualifying applicants would utilize CS3, and existing beneficiaries would age out of the system.
Key Features of CS2 v CS3
CS2 is generally calculated by a fixed percentage of net weekly income after tax and national insurance at 15% for 1 child, 20% for 2 and 25% for 3. For incomes less than £100, there is a minimum flat rate of £5. Under CS3, the supporting parent will pay new rates out of gross income as follows:
Income per week Payment for 1, 2 or 3 children out of gross income
Less than £100 £7 flat rate
£100 - £200 Reduced rate
£200 - £800 12%, 16%, or 19%
£800 - £3,000 9%, 12%, or 15%
The maximum age for support is increased from 19 to 20 years. The scope of discretionary factors, known as ‘variations’, that the CSA can consider to affect the level of payment under CS3 have changed considerably.
Favourable Changes to ‘Variations’ for Non-resident Parents
There will be greater scope for the non-resident parent to reduce payments by offsetting contact costs such as travel expenses when visiting children.
There will also be a tightening of the grounds by which the parent with care can argue for an increase in the payments. Firstly, unearned income, such as dividends, will be calculated from the HMRC tax return only. Secondly, CS3 does not include any return on assets when calculating income. Thirdly, a request for payment revision based on “lifestyle inconsistent with income” is no longer grounds for investigation.
If a private agreement cannot be reached, parents with care may benefit by submitting applications under the CS2 before the CS3 is fully rolled out in order to best avoid a misrepresentation of income by the non-resident parent. However, expert advice should always be sought from an experienced professional before making any decisions regarding child support; please contact Jeetesh Patel via e- mail JPatel@rollingsons.co.uk or by telephone on 0207 611 4848.