Law Articles

Child maintenance & individuals on high incomes 17/10/2023

After parents separate or divorce, the issue of child maintenance is likely to arise. Child maintenance covers the child’s living costs and is paid by the non-resident parent to the parent with whom the child lives.

The Child Maintenance Service (CMS) has sole jurisdiction in respect of child maintenance. To qualify for child maintenance, a child must be under 16 years of age (or under 20 if they are in full time education – up to A Level or equivalent). Child maintenance is payable even if the non-resident parent has no or limited contact with the child in question.

There is no obligation to use the CMS when calculating child maintenance, and most parents simply agree the monthly payments themselves by using the formula on the CMS website. Parents can agree a higher amount of child maintenance than is specified by the CMS, but there is no point in agreeing a lower sum because the jurisdiction of the CMS cannot be excluded and is therefore the minimum the non-resident parent should pay.

Child maintenance payments do not affect any benefits the parent and child may receive, and the payments are not subject to income tax.

To qualify for child maintenance, the parent making the application must live in the UK or have the right to live in the UK. If the non-resident parent does not have an income, is a full-time student, or is in prison, no child maintenance is payable to the resident parent.

If child maintenance is included in a court order in divorce proceedings, the court retains jurisdiction of the matter for a year. After 12 months, either parent can make an application to the CMS to revise the agreed figure if agreement cannot be reached directly between the parents.

When considering the paying parent’s gross income, the CMS will take into account any pension contributions the paying parent makes, and other children the paying parent is responsible for. The number of nights the paying parent has the children will also affect the level of child maintenance payable.

The CMS works out child maintenance using one of the five following rates, based on the gross weekly income of the paying parent:

If the paying parent’s gross weekly income is more than £3,000, the receiving parent can apply to the court for extra child maintenance (called a “top-up” child maintenance order) however a CMS assessment must be made before such a court application is made. Such court applications are not without problems though. As more people are now earning over £156,000 per annum, courts are being asked to deal with such orders more often. As there is no formula for calculating the top up element of child maintenance (like there is the with CMS), dealing with this issue either by negotiation or at court can be tricky.

The issue of top-up child maintenance orders was addressed in the case of James v Seymour [2023] EWCH 844 (Fam). The court in this case introduced an 'Adjusted Formula Methodology (AFM)' which applies where the paying party’s income exceeds the statutory limit of £156,000, up to the upper limit of £650,000.

The facts of this case are as follows: the parties were married for two years and had two children aged 12 and 10 at the time of the appeal. Many issues were dealt with in this case, but this article focuses on the court’s view on how top-up orders in respect of child maintenance should be dealt with. The first step is to calculate the paying party’s exigible income. The ‘exigible’ sum is calculated as follows: gross earned income, subtract a reduction for other children living in the paying party’s household (11% for one child, 14% for two children and 16% for 3 or more), subtract the paying party’s relievable annualised pension contributions and subtract the grossed-up school fees. The formula looks like this: E = (G x (1-Z)) – P – (S/0.55).

This exigible sum is subject to an adjusted formula. The adjusted formula is calculated by taking the results from the original formula at E = £156,000 in respect of one, two and three children and applying a tariff of 2.4% for a single child and 3% for two or more children. The product is reduced to take into account any shared care. This would be the starting point and then the court would consider both parties’ budgets in the usual way to cross reference whether the outcome of the formula is fair. The court’s view is that this formula is a helpful tool to assist the parties and court with this issue and that it is a “loose starting point” but accepts that the formula is unsuitable where there are four or more children for whom child support is to be paid; the exigible income of the paying party is more than £650,000 per annum; the paying party’s income is largely unearned; the paying party lives on capital; the application is for variation of an existing child maintenance order.

For further information and advice on this issue, and other family law issues, please contact us for a free initial consultation on 01992 306 616 or 0207 956 2740 or email us.