Self employed and no cms

Misteek

Hi guys

I have a friend who has a child with an ex partner. He has remarried and has another child living with him.

However he doesn't have my friends mutual child staying him at any point.

He has now opened a limited company as he has a very good job working for the NHS (doc).

He is threatening he won't pay child maintenance as he will become self employed unless he makes private agreement with my friend without cms involved.

Can someone give any clarity on this ?

DE_612183

So your friends ex is opening a Ltd company and saying he won't pay CMS?

If he has a ltd company he will still have to pay himself PAYE & possibly dividends - which would all be taken into account if the case needed to go to tribunal ( I would suspect ).

Your friend can see what he has to say about a private agreement - but that would not stop her/him making a claim if needed.

Misteek

DE_612183 said:

So your friends ex is opening a Ltd company and saying he won't pay CMS?

If he has a ltd company he will still have to pay himself PAYE & possibly dividends - which would all be taken into account if the case needed to go to tribunal ( I would suspect ).

Your friend can see what he has to say about a private agreement - but that would not stop her/him making a claim if needed.

Yeah but what's he saying is he will end up reducing his wages etc through the limited company. As a GP he makes alot currently. Hut he will massively reduce it. Unless she is willing to make a private agreement for alot less.

DE_612183

Misteek said:

DE_612183 said:

So your friends ex is opening a Ltd company and saying he won't pay CMS?

If he has a ltd company he will still have to pay himself PAYE & possibly dividends - which would all be taken into account if the case needed to go to tribunal ( I would suspect ).

Your friend can see what he has to say about a private agreement - but that would not stop her/him making a claim if needed.

Yeah but what's he saying is he will end up reducing his wages etc through the limited company. As a GP he makes alot currently. Hut he will massively reduce it. Unless she is willing to make a private agreement for alot less.

And that is the point - using a Ltd Company allows you to take income in a different way - for example - I used to "earn" or pay myself wages of about £15k a year - however I also took profit in the form of dividends of about £70k-£80k per year.

I'd be inclined to see what he has to say - CMS for self-employed is usually based on GROSS income - so what goes into the Ltd Company.

Lets be honest - not many people take a reduction in pay, especially as he has a family to support.

Misteek

I heard you can ask a verification if he does decide to reduce his wages so low ?

We didn't know the gross income of the limited company was what the cms used. We thought it was just his pay from the Ltd company?

DE_612183

You'd have to ask CMS - but I'd think like benefits they are interested in the income overall - not just wages.

By paying dividends you can save some NI and higher rate tax - but it doesn't mask the amount of money coming into your bank account. also if it's a Ltd company the income in is the public domain - you can search for the company and him on companies house website.

PJWindowframe

Cms can 'look through'  the company and treat all the company income as the income of individual regardless of the actual pay and dividends drawn from the company.