The CSA and Inheritance

Crellow4

If you had £165k in the bank, or as equity in properties the full amount would be assessed at 8%. This would produce an annual figure of £13200 which would then be assessed for maintenance in the normal way.
1 child = £1980 extra per year = £38 per week
2 children = £2640 extra per year = £51 per week
3 children = £3300 extra per year = £63 pr week.

kevin137

And again we go around in circles, as equity in property, if it is declared as "earning an income" which is reinvested, then you could effectively have NO income and the equity couldn't be touched as it is declared as earning an income for business purposes...

That would result in an assessment of £165,000 being NIL

Crellow4

I understand what you're saying Kevin137 but are you honestly suggesting that this money invested in rental properties would produce no income? I'd be interested in your explanation of how this can be done. There would be no mortgage interest payments to offset against the rental income...........

kevin137

If you set it up as a business, then the reinvestment of capital in more property while expanding the portfolio actually keeps the turnover growing while actually not earning an income...

You still have capital gains tax etc as you would in the future on any property, but as a business you can keep the money away from the hands of the CSA while making it earn potentially huge amounts of money for you in the future...

The thing with inheritance is, as time moves on, the more you inherit so to speak, yet the £65,000 has stayed pretty static, although there are many other things that cause an inheritance to be less.

As an example, my nan is on end of life care, she has a net worth of around £280,000 so would not be liable for inheritance tax, if the money was to bypass my mother and be left to me, which is actually not as strange as it sounds and pretty normal in these days, then do you really thing that as an adult who would potentially have children who may be claiming CSA as part of my circumstances should be given to an ex...? It should be my choice, so given my age and current circumstances i would in fact do everything in my power to make sure that the inheritance was not included. And i don't think any body should judge for this, it would be left for my children on departing the world anyway, but it is not for supporting them now.

You just buy more spend more, buy more spend more to do exactly what i said, and as long as it is declared as an income or business, they cannot expect anything from it....

HoneyNutLoop

Kevin,
Yes, if the op set up a limited company and invested his money in that company it would no longer fall to be considered as an asset under that variation ground. But the income (if any) from that ltd company would be considered under primary legislation if PAYE, or under a variation for income not taken into account, if dividends. If the op paid themselves no income, or vastly lower income than the company's profits would allow, they would be leaving themselves open for a variation for diversion of income. The investment of the money in property would not negate profits, because the value of the company's assets including property are considered when compiling the company's accounts and resultant taxable profits. The op would have to submit these corporate accounts each year or get an accountant yo do it, and the company would have to pay it's corporation tax of 24% of the company's assessed profits.

The solution you propose is not as straightforward as you are making it out to be, and as Crellow says, there will only be so many costs that can be offset from the company's profits, and those costs may not exceed the rental income. If the op wants to invest in property, setting up a limited company is a worthwhile option, for lots of reasons that having nothing to do with the child support calculation. But doing so just for child maintenance reasons is 1) a lot of work especially if you're not committed to the business and 2) no guarantee of achieving the outcome sought. He could end up paying more in corporation tax than he would have for child maintenance!

If you're not talking about setting up a limited company, the op would need to register as self-employed for the exclusion on assets to apply. However, his taxable profits for self-employment would then be included as income for child maintenance under primary legislation. If the op just included the income from the rental of property under the property section of a self-assessment tax return rather than registering it as a self-employed business, then the business assets exclusion would not apply.

For child maintenance, there are simpler options. The op could pay off his own mortgage (if he has one) as a starter for 10.

Just for info, more than anything else, as I note the earlier debate, you will note the other PWC variation grounds set the income threshold at £100 a week for an award to be considered, but the full amount of income if this threshold is breached is then taken into account. The 65k threshold x8% = £5200 a year or £100 a week, so all this threshold is doing is putting the same income limit on this ground as the same as on the others.