CMS Reviewing Income

Marker_2

I have only just learned of the new system, but as my ex is in arrears I think I will be one of the later ones to move over onto it.

My question is regarding change in pay. As it stands I have had to (snoop) to find out how much my ex is on and whether he is in receipt of extra allowances or bonus' and inform CSA myself. This is following me finding out about a £5000 taxable bonus he received in work 9 months later, only for CSA to tell me I should have told them within a month!!

Anyway, because my ex's pay can increase from time to time, and assuming under the new scheme it is 20% for 2 children. How will the new system work with monthly income.

My ex was never forthcoming with his earnings especially if they increased. Is this issue tackled on the new system?

Literally just found out about this so am sure I will have a whole load more questions.

PreludeForTimeFeelers

The new scheme is assessed using HMRC figures - CMS literally just press a button and get the last tax return, and these figures are used for the assessment. The paying parent can dispute this if they are earning 25% more or less of the hmrc amount. They also have to inform CMS if the amount changes by more than that 25% tolerance amount.
Once a year an automatic annual review takes place, where the system will check hmrc figures again and then a new assessment will be put in place using the up-to-date income.

Mips

PreludeForTimeFeelers wrote: »

The new scheme is assessed using HMRC figures - CMS literally just press a button and get the last tax return, and these figures are used for the assessment. The paying parent can dispute this if they are earning 25% more or less of the hmrc amount. They also have to inform CMS if the amount changes by more than that 25% tolerance amount.
Once a year an automatic annual review takes place, where the system will check hmrc figures again and then a new assessment will be put in place using the up-to-date income.

Well I have just found this out.

So if they job hop around this time it comes in really handy doesn't it. Like my ex.

Was earning several k a month, then decided to drop to part time to claim tax credits to avoid paying maintenance.

So next year when he is reassessed and does the same... where does this end?

They can repeatedly get out of paying ?

Or am I wrong?

DUTR

Mips wrote: »

Well I have just found this out.

So if they job hop around this time it comes in really handy doesn't it. Like my ex.

Was earning several k a month, then decided to drop to part time to claim tax credits to avoid paying maintenance.

So next year when he is reassessed and does the same... where does this end?

They can repeatedly get out of paying ?

Or am I wrong?

With your example, they do not get out of paying, as the annual income is used for assesment purposes.
It ends when the qualifying child reaches near 20.

Mips

DUTR wrote: »

With your example, they do not get out of paying, as the annual income is used for assesment purposes.
It ends when the qualifying child reaches near 20.

But they can appeal can't they if their income is 25% less so therefore wont have to pay the higher amount? Or am I wrong?

DUTR

Mips wrote: »

But they can appeal can't they if their income is 25% less so therefore wont have to pay the higher amount? Or am I wrong?

They would have to wait until the next p60 to show they are earning 25% less. You are assuming the appeal would be upheld.

Mips

DUTR wrote: »

They would have to wait until the next p60 to show they are earning 25% less. You are assuming the appeal would be upheld.

But if their income is 25% less every year after doing the assessment, they wont mount arrears surely as they have a valid way of appealing they wont have enough to live?

So even though they have earnt alot the previous year, when it comes down to after April and they are earning alot less.. this wont be taken into account?

Or am I mistaken?

HoneyNutLoop

Mips wrote: »

But if their income is 25% less every year after doing the assessment, they wont mount arrears surely as they have a valid way of appealing they wont have enough to live?

So even though they have earnt alot the previous year, when it comes down to after April and they are earning alot less.. this wont be taken into account?

Or am I mistaken?

You haven't fully understood the new review system. Take a look at this:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/325172/changes-to-tell-us-about.pdf

The key bits are:
that change in income being reported must be likely to stay the same for the foreseeable future, and
that if the income used in the calculation has been provided by the Paying Parent, employer or accountant, rather than HMRC, the Paying Parent is legally required to report and increase in income of more than 25% within 7 days of the change occurring.

CMS will find out if such a change has occurred, but not been reported, due to the next annual review. If the income HMRC provides is at least 25% higher than the income the Paying Parent reported, they will know an unreported change has likely taken place.

eve31

Mips wrote: »

But if their income is 25% less every year after doing the assessment, they wont mount arrears surely as they have a valid way of appealing they wont have enough to live?

So even though they have earnt alot the previous year, when it comes down to after April and they are earning alot less.. this wont be taken into account?

Or am I mistaken?

Hi, not sure if you are still around but revived this as I think it is a loophole too and know exactly what you mean.

Someone who pays tax via self assessment - limited company sole director/employee and self employed can pay themselves a low amount and show current income has dropped by over 25% at the end of the tax year and get income based on current income instead of the latest figures from hmrc. Then in the following tax year pay themselves a lot more, when these figures get round to being the latest figures, in the next tax year pay a low amount again and show a drop in over %25 and get it based on current income thus never paying maintenance on the higher income.

It's a loophole definitely. I've tried voicing my concerns about this to a case worker and it's like I'm speaking a foreign language.

HoneyNutLoop

Ok, if they're self-employed and the assessment is already based on the most recent complete tax year, how will they be able to get it reduced? They only look at tax returns as evidence for the self-employed. I.e, if someone who is self-employed has promptly filed their 2014/15 tax return well before the deadline, and that's being used, they won't have another return to supply til next year. At that point, it would be appropriate to use that return.

In your case, I believe you've said before that they pulled through 2013 tax year from HMRC. If your ex asked to be put on current income, because his 2014/15 tax return was more than 25% less, while I can understand you'd be unhappy, it would be the most up to date info. Then next year, they'll pull another complete tax year's info.

If someone's employed and say it pulled through £30,000 for tax year 2014/15, the paying parent would have to provide evidence to show their earnings have reduced to below £22,500 per year, and this change is to continue for the forseable future, before they will change the calculation. Also, because they would now be on what CMS call "current income" they are legally required to report if their income increases by more than 25% within 7 days of the change occurring. In this situation, any new calculation takes effect from the date the change occurred, not when it was notified. So say at the next annual review, they pull through £32,000 for tax year 2015/16 (compared to current income of £22,500), CMS are alerted that an unreported increase has taken place, and can then go back and find out when the change happened, to recalculate for that period.

eve31

When I opened my case with CMS in April 2014 it was based on the most recent tax year 2013 (2012-2013) as the 2014 return (2013-2014) didn't have to be submitted until the deadline January 2015, so obviously the most recent tax year when I opened my case was 2013.

My ex did not want his assessment based on 2013 tax return as it showed his income of around £31,000. He has a one man band limited company sole director/employee and can control income he pays himself and puts in a personal pension. So for the April 2014 tax return he reduced his dividend and put 60% of the small salary and dividend a personal pension. Thus minimising his income for child maintenance and putting him in the reduced rate bracket.

In October 2014 he showed proof of excessive pension and that was deducted from his earnings then in January 2015 showed dividend reduction and got it all backdated to the opening of the case in April 2014. He stopped paying last November even though he paid maintenance throughout the year of someone on a salary of £13,000 this is now considered an overpayment even though he lowered his income to £22,000 because of the pension contributions being 60% of that £22,000.

As a result he hasn't paid anything for 6 months and has no intention of doing so, I am awaiting a tribunal but it could take another 9 months.

In my review in April 2014 they gave his weekly income which was the low figure from his 2014 tax return and said income was based on latest available 2013 tax. It doesn't match up obviously.

From April 2014 to April 2015 tax year he could of paid the same level of dividend he always has and put less in his pension and have a bigger income. This return doesn't have to be submitted until January 2016, when this does eventually become income to be assessed he can lower his dividend and increase pension again and get it based on the current information and get it backdated again.

I hope this all makes sense.