Another weapon in the armoury of the Child Support Agency
Under the current rules, it is only taxable income that is taken into account by the Child Support Agency which will then work out, in accordance with the formula, the child support figure that has to be paid.
On this basis a paying parent, often but not always the father, who is asset rich but has a very low taxable income may find that he or she has a very modest child support liability, even though they are very wealthy by the standards of most people.
Under the old rules, it was possible to obtain a variation of the calculation so that the assets of the paying parent were taken into account but this rule was abolished in 2012 in order to, it is argued by some, make life easier for the Child Support Agency, who would, as a result of the change, not have to undertake a potentially time consuming and difficult process in identifying and forming some view as to the value of the paying parent’s assets.
However, this change in the rules inevitably caused some injustice in that some very wealthy paying parents were able to pay very little child support and it is a positive step that the rules have been changed, yet again, with the effect that the assets of the paying parent may, once more, be taken into account.
On this basis a variation of the child support formula, to take into account the assets of the paying parent, will very shortly be available, where it can be shown that the paying parent owns, or has an interest in, an asset or several assets, which have a value in excess of £31,250. Where this can be proved, the assets will be treated as generating an income equal to 8% of the value of the assets. This additional income is then added to the “normal” taxable income of the paying parent for the purpose of calculating the child support liability.
If, therefore, a paying parent has assets which are worth, say, £50,000 then this will result in the paying parent being treated as having additional income of £76.92 per week. This will, when the formula is run, result in there being an increase in the child support liability of £12.30 a week, assuming that there are two children and the taxable income of the paying parent falls into the basic rate i.e. his/her income is less than £41,600.
Not all assets owned by the paying parent will be taken into account. For instance, the value of their home and the value of any asset, which is a business asset, will be ignored. However, it is likely that any money owned, or owed to the paying parent, will be taken into account as well as any land/property, shares and other investments and even, in some cases, virtual currency.
If you have any questions relating to the above, please feel free to contact Benjamin Carter on email@example.com or 01892 506081