Self Employed NRP and dividend payments

justontime

I hope someone can please help us on this issue. My husband became self employed in October. It was not a decision taken lightly but due to his disability he could no longer cope with the travel to involved in his previous employment and self employment has enabled him to have greater flexibility. He pays child support via CSA and is on the old scheme (CSA1). He notified CSA of his change of circumstances straight away and was asked to continue to pay at his old rate for 3 months then they would do a reassessment. He is still paying CSA at his old rate, It took some time before he got money coming into the business so March will be the first month that he takes a salary (and some back pay).

He is trying very hard to earn at least as much as he used to when he was employed so that the amount of CSA he pays will not change significantly. However he will have a fluctuating income depending on how well the business does. Due to some changes to HMRC rules his accountant wants him to take a low monthly salary from the start of the new tax year and to top up with dividends. My husband initially said no to this as he doesn't want to mess up CSA, but the accountant seems to think that it is very straightforward and CSA will treat the dividends as income and make an assessment based on the dividends and the salary. Is this correct? It is a Ltd company and my husband is the only director and there is no one else working for the company. The last thing he wants is to cause problems with CSA, he wants to do the right thing for his children. It isn't possible to make a private agreement so he has to get this right through CSA.

Crellow4

If he incorporates the business he will change from self employed to employed. The CSA payments will initially be based on the salary (PAYE) - dividends will only be brought into play if you apply for a variation and if the dividend income exceeds £100 per week. Could you not reach a private agreement?

justontime

Thanks for the advice. It is already a Ltd company. He can't come to a private agreement for several reasons but the main reason is previous benefit fraud by his ex, it is probably better not to go into further detail. He is on csa1 so would it be possible for him to ask for a departure to have his divided income treated as income for the csa assessment? If not it doesn't look as if he can pay himself in the way the way his accountant recommended because it would mess up the csa assessment.

clearingout

maintenance is no longer taken into account for benefit purposes, if that's the problem. The law changed on this in 2010.

HoneyNutLoop

Crellow4 wrote: »

If he incorporates the business he will change from self employed to employed. The CSA payments will initially be based on the salary (PAYE) - dividends will only be brought into play if you apply for a variation and if the dividend income exceeds £100 per week. Could you not reach a private agreement?

This only applies to CS2. Under CS1 dividends are treated as income without the need for a departure (cs1 version of a variation).

FBaby

This is so refreshing to read, an nrp deciding to go self-employed, but taking into consideration how this decision might affect his children. I hope his business does well quickly.

Crellow4

Sorry, assumed it was a CS2 case. If its CS1 the Dividend payment will form part of the mainline assessment. He can always pay MORE than the CSA liability or not request a supersession - effectively leaving the assessment the same.

justontime

Thanks everyone your advice has been a big help. Crellow4 I was interested in your last comment. My husband asked csa about paying more because he was worried about an initial nlll/low assessment as it takes several months to generate cash flow, and he was told that he could not pay more than the assessed amount. I also thought that he was required to notify any change of circumstances such as a change of job straight away so I don't think there is any way he could have avoided telling them that he is now self employed. Paying more privately is not an option he would if he could but he PWC is extremely hostile and my husband has been through hell with csa due to her dishonesty. He loves his children and he is determined to do what is right for them including making sure he pays towards their support. He has always paid his child support on time, he has no csa arrears and he is intends to do everything in his power to ensure that it stays that way.

Crellow4

He can only pay more than the assessed amount if it is direct to the PWC. If he doesn't report a change of circumstances, the payments will not be altered - is this what you're trying achieve?

justontime

Crellow4 wrote: »

He can only pay more than the assessed amount if it is direct to the PWC. If he doesn't report a change of circumstances, the payments will not be altered - is this what you're trying achieve?

We thought that he was obliged by law to report a change of job or other change of circumstances within 7 days. If not it is probably still best that he has been open and honest with csa, otherwise it may look as if he was trying to be deceptive. He reported the change straight away when he became self employed (in Oct 12), but he is still paying at the old rate (while they do the reassessment) I think it should work out at about the same level of csa payment up until March and my husband spoke to his accountant today, I think they have now got the payments for the next tax year sorted so that csa will not go down. Thanks for the advice.

Crellow4

There is no legal obligation to report a change of circumstances - other than address. If you can see the payments are going reduce, and don't want them to, don't instigate a supersession!