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I've tried to read as many posts as possible wrt this topic but still have a few questions I was hoping someone could help me with.
My father passed in June and proceeds from his estate will be split between me and my 3 brothers. I have two daughters, one has recently left full-time education and is now full-time employed. The other is still in education and will be for at least 2 further years, hence I make the appropriate direct payments to my ex-partner under a CMS case.
What I've understood is, when my ex applies for a variation, the CMS will asses me for Notional Income earned from a lump sum over £31,250. They assume I receive a notional income of 8% from this lump sum and if this 8% is over £2,500 a year, they will include it in my CMS calculations.
My questions are:
- will they assume I earn 8% annual return on this lump sum irrespective of what I actually earn from it (i.e. if the lump sum sat in a current account earning next to nothing, can/will they still apply an 8% annual return)?
- is the calculation made after 1 year, or do they start applying the 8% from Day 1 of having the lump sum (even though on Day 1 I won't have received a single penny of interest)? Related question, if I can prove after 12 months that I didn't receive 8% return and/or that this amount wasn't > £2,500 would this be relevant or is the 8% applied regardless?
- if I spend the lump sum such that it dips below the £31,250 threshold, can/will they still include?
- is the full lump sum used in the calculation or only any amount above the £31,250 threshold (ie. for a lump sum of 32k, is it 32k or 750)?
Finally, I read that after all of the above, the CMS make a subjective judgement on whether or not it's 'fair' to re-calculate payments. They will quite rightly make this judgement on what's in the best interest of the children/child. Would it be relevant that my late father has provisioned for my daughters in his will, separate to the provision made for my brothers and I? Can anyone share any examples of what the CMS judge to be fair? For example, do they consider money I give to my daughters, outside of CMS payments to their Mum, for food and clothing while she has 3 holidays a year?
Any help greatly appreciated.
Hi,
I recommend you join this CMS support group for paying parents. Plenty of experienced members: https://www.facebook.com/groups/239699060076601/?ref=share
@bill337 many thanks. I'm already on there ...
Can anyone help?
My understanding is :-
The CMS will only apply a notional income variation if the receiving parent asks for one. So it depends if the RP is aware of your inheritance and furthermore decides to apply for a variation to take it in to account.
I also understand that the CMS apply the £31,250 threshold check on each individual asset. So if you split your inheritance in to multiple individual assets - eg. several different bank accounts, ISAs etc such that nothing by itself breached the £31,250 threshold then no notional income would be calculated.
Yes - it doesn't matter how much return you actually get on the money, the CMS calculation is 8% of the value regardless of the actual return (as long as the asset value is > £31,250).
In my experience - the notional income is calculated for as long as the asset(s) exceeds the threshold. So in practice the CMS will ask for an asset disclosure and if an asset is > £31,250 then they are able to calculate notional income on that asset and assess you on that notional income. However if that asset value changes then you can apply for a recalculation on the grounds that the valuation has changed and the new calc uses that new value - and if the new value is < £31,250 then no notional income is calculated. Note here that the rule about income having to change by 25% (from what was previously used in the assessment) in order for a recalculation to be applicable in the current year ONLY applies to earned income, i.e. salary. It does not apply for other income such as 'notional income'. I did this at the CMS annual review date - what I don't know is that in theory the asset value can changes every day, so what 'common sense' rule applies here - i.e. it is obviously stupid to recalculate every day.
Yes - this is a subjective opinion by the CMS. So all bets are off ! In my case I had ISA money that was put aside to pay off an interest only buy-to-let mortgage. Despite initially deciding not to calculate notional income on this money, they later changed their mind and decided to include it in a notional income calculation and assessed me for CM on that notional income. I argued that if I had chosen a repayment mortgage instead then those funds would never have been there to be assessed, and so why should a simple decision I made on how to repay my mortgage impact how much child maintenance I have to pay ? Yeah it's the CMS's subjective call on this - in my case it went against me but I am appealing to HMCTS.
The following 'Decision Maker's Guide on Variations' is quite comprehensive and may be useful also for all kinds of variations. Chapter 34 I think deals with assets over a prescribed value
@Will99 thanks so much for this.
How certain are you about dividing an asset into separate accounts, each holding less than the 31,250 threshold? I ask because I thought I'd read that they lump them all together for both the initial threshold assessment and then also for the calculation.
Best
Very confident. Paragraph 34007 of the Decision Maker's Guide that I provided a link to states the following :-
34007 Where there is more than one type of asset held, their value will not be added together to meet
the threshold. Where there is only a single type of asset, they can be considered as one asset, and their
aggregate value considered against the threshold limit.
I am not sure whether technically speaking by the above definition having eg. multiple bank accounts counts as 'different types of asset' - I would probably think not. However in my case I had several ISA fund holdings - and 3 of them were above the threshold. Only these 3 funds were subject to a notional income calculation. I then diversified my holdings such that no single holding breached the threshold, and on the annual review none were subject to a notional income calculation. Thought the CMS did say that 'it could be argued' that they were all the same type of asset. So perhaps I was just lucky, but I would probably try and have different 'types' of asset. Eg. current account, savings account, Cash ISA, Stocks & Shares ISA, whatever else - maybe at different financial institutions as well.
Less confident now, sorry.
I had an appeal hearing last week and the tribunal judge was saying that the CMS erred in my case, and they should have treated all assets of the same type as one asset and aggregated their value to check against the £31,250 threshold
@Will99 This is very helpful. Thanks so much.
Was there a subjective element to their ruling? I ask because some of my assets are ISAs for amounts my Dad left for the children in his will, until they’re 21. Too big for a Junior ISA. Would the fact any interest from these accounts will eventually go to the children have any bearing?
best
Vince
I would like to think that there is a subjective element to these decisions. After all, in my case the CMS decided (albeit apparently erroneously) only to include individual ISA holdings and not the aggregated total - that part was the vier of the HMCTS tribunal judge.
I don't know but I would sincerely hope that your arguments about the money being for your children and not yourself would be considered and accepted, and this money not included in any asset variation. Have you any document that details your father's wishes in this regard ? Does his Will state anything about this money ?
It is so tough - all the scrutiny and onus of proof seems to be on the paying parent, and very little on the receiving parent. The CMS seems to be inherently biased that way. Maybe this helps chase non-resident parents who are otherwise unwilling to pay their fare share, but it is really unfair on NRPs who are willing to support their children, and can result in unfair outcomes for them in my view. That is the core issue which makes the CMS unfit for purpose in my view.
Anyway, good luck to you.
Couldn’t agree more. Guilty until proven innocent.
Sorry to bother you again, but do you (or anyone else on here) know what the situation is with wrt notional income if an asset (in my case inheritance) is no longer in an account in your name, either because you spent it or gifted it to a friend or family member?
Can they use a certain date after which no matter what’s happened to inheritance, they still apply 8% regardless, even if you no-longer possess the asset?
Best
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