2024/12/26

Using an umbrella company to avoid child support

Understanding Umbrella Companies and Child Maintenance Calculations

An umbrella company plays a pivotal role in managing payroll services for certain workers, often treating them as employees for administrative purposes. For child maintenance calculations, this classification has significant implications.

This comprehensive guide breaks down the nuances of umbrella companies, their role in child maintenance assessments, and the handling of non-taxable expenses.

What is an Umbrella Company?

Keyword: Umbrella Company Definition, Payroll Services, HMRC Managed Service Company

An umbrella company manages payroll and administers wages for contractors and temporary workers. Under HMRC legislation, they are often referred to as managed service companies.

For child maintenance purposes:

All payments processed through an umbrella company are considered income from employment.
Income typically includes salary and allowable expenses.

How Umbrella Companies Work

Keywords: PAYE Tax, Umbrella Company Payslips, Employee Income

Employees working through umbrella companies pay income tax under the PAYE (Pay As You Earn) scheme. Their payslips typically reflect the following:

Invoice transactions managed by the company.
Deductions for taxes and National Insurance.
A fee or commission for the umbrella company’s services.

In some cases, expenses such as travel and subsistence may appear as a “first charge,” effectively lowering gross income and, subsequently, tax liability.

Non-Resident Parents (NRP) and Umbrella Companies

Keywords: Non-Resident Parent Income, Child Maintenance, Umbrella Company Indicators

When assessing an NRP’s income, it's essential to consider expenses and identify if they’re employed through an umbrella company. Indicators include:

Management fees deducted.
PAYE taxes appearing unusually low relative to gross income.
High levels of expense claims.

Actionable Tip: Child Maintenance Decision Makers (DMs) will request payslips and may need to contact employers for accurate income details.

Understanding Expenses and Child Maintenance

Keywords: Non-Taxable Expenses, Umbrella Company Tax Rules, Maintenance Liability

If an NRP uses an umbrella company, only non-taxable expenses actually incurred can be deducted from their gross wage. These deductions affect the calculation of maintenance liability.

For example:

Travel expenses for business purposes (excluding commuting).
Professional fees to approved organizations.
Specific expenses for ministers of religion or entertainers.

Refer to the Table of Non-Taxable Expenses below for detailed definitions and examples.

Non-Taxable Expenses: Definitions and Examples

Keywords: Allowable Expenses, Tax Deductible Costs, Expense Categories

Expense Type	Examples
Travel Expenses	Public transport, hotel stays, business mileage, parking fees.
Professional Fees	Membership fees for organizations on HMRC’s approved list.
Employee Liabilities	Legal advice or indemnity insurance for work-related matters.
Ministers of Religion	Rent, travel, secretarial costs for clergy.
Foreign Employment Rules	Travel costs, accommodation, and subsistence for duties performed abroad.

For detailed HMRC guidelines, see EIM33000.

Key Takeaways

Payments via umbrella companies impact child maintenance calculations, particularly due to expense deductions.
DMs must carefully evaluate payslips and supporting documents.
Non-taxable expenses are a critical factor in determining accurate maintenance liability.

Hashtags:
#ChildMaintenance #UmbrellaCompany #PAYETax #NonTaxableExpenses #HMRC #PayrollServices

Conclusion:
Understanding the intricacies of umbrella companies and their role in child maintenance ensures transparency and compliance with HMRC guidelines. Workers and decision-makers alike must navigate these systems with care to ensure accurate financial assessments.

2024/12/09

Child maintenance arrears - What you need to know!

How Child Maintenance Arrears Work in the UK (With Examples)

Child Maintenance Service (CMS) arrears in the UK can seem complicated, but understanding the basics can help you navigate the system. Here's a breakdown of how arrears can arise, how they’re managed, and what to expect:

1. Arrears Due to Paying in Arrears

CMS payments are calculated daily but collected monthly. This means payments are effectively in arrears because the amount for the month has already accrued by the time it’s paid.
Example: If your monthly payment is £300, the balance on your account will show £300 due on the day it’s calculated, even before you’ve had a chance to pay.

2. Daily Calculation and Monthly Addition

CMS calculates what you owe daily and adds it to your account monthly. This can make it seem like arrears are increasing on the day of calculation.
Example: Suppose your daily rate is £10. After 30 days, £300 is added to your account.

3. Impact of Payments on Arrears

When you make a payment, the arrears balance decreases. However, if a payment is late or incomplete, arrears remain on your account.
Example: If your due amount is £500 and you pay £499, the system assumes you’ve missed the full payment and reflects the entire £500 as unpaid. To fix this:
- (a) Prove you paid £499 (e.g., via bank statements).
- (b) Contact CMS to credit your account.

4. Changes Are Backdated

Adjustments to shared care or other factors are backdated to the date of the reported change, not when they’re processed.
Example: If a paying parent gains more shared care in January but CMS processes the change in June, a credit or debit will apply from January. If there is a credit, payments will be lowered going forward. You wont receive money back.

5. Impact of Pension Contributions

Proving pension contributions can reduce your CMS liability, and this reduction is backdated to the start of the payment year.
Example: If your CMS payment is £400 per month and pension contributions reduce it to £350, you’ll receive a credit for the £50 difference for each month of the year.

6. The Arrears Balance Isn't Always Paid

Arrears are factored into your payment plan, so you don’t pay them as a lump sum. The plan ensures ongoing payments include a portion to address arrears.
Example: If your regular payment is £400 and you have arrears of £1,200, your plan might set payments at £450 to cover both.

7. Annual Adjustments Can Create Arrears

Payment plans sometimes set amounts slightly below the weekly rate, causing minor arrears. These are resolved during the annual review.
Example: A stable-income payer might see their annual review adjust payments up or down slightly, clearing small arrears or overpayments.

8. System-Generated vs. Enforced Arrears

Some arrears result from system delays or errors, such as processing a change late. These arrears are usually not enforced.
Example: A delay in processing a shared-care adjustment might temporarily show arrears that CMS later removes.
However, arrears due to missed payments may be enforced, often through a Deduction from Earnings Order (DEO).

How to Deal With Arrears.

Very simple. Just stick to the payment plan.

Common Questions

Question: I am on direct pay, and I keep paying the arrears but the figure does not go down. Why?

Answer: On direct pay, the CMS assume you are paying the schedule, so they wont be aware of the seperate arrears payments. So stop paying them. Your arrears balance wont go down, as no one knows you are paying.

Question 2: Can I spread the arrears over a longer time period?

Answer: Yes you can. I know of cases where the arrears are being paid at as little as £5 per week, and other cases where the payments are being made over 8 years.

#ChildMaintenance

#ChildSupport

#SupportForChildren

#ChildSupportArrears

#childmaintenanceservice

#cmsarrears

#FinanceHelp

#MoneyManagement

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#CMSExplained

#ArrearsHelp

2024/11/25

Illness or Disability Claims for a Relevant Other Child

Understanding Illness or Disability Claims for a Relevant Other Child (ROC): A Comprehensive Guide

When it comes to child maintenance calculations, the care of a Relevant Other Child (ROC) with an illness or disability can lead to adjustments known as ROC variations. These variations consider the additional expenses associated with long-term illness or disability. Here’s a detailed guide to help parents navigate this process, ensuring they claim the support they’re entitled to.

What Is a Relevant Other Child (ROC) Variation?

A ROC variation allows parents to factor in specific costs related to the care of a child with an illness or disability. These claims can only be made if the illness or disability is considered long-term, which we’ll define next.

Key Definitions: Illness and Disability

Long-Term Illness

A child’s illness qualifies as long-term if:

It is expected to last at least 12 months, or
It is likely to persist for the rest of the child’s life (if shorter than 12 months).

Disability

A child is considered disabled if any of the following apply:

They receive the daily living component of Personal Independence Payment (PIP), Disability Living Allowance (DLA), Armed Forces Independence Payments (AFIP), or similar benefits.
They are eligible for such benefits but payments are paused due to hospitalization.
They are registered blind, or recently recovered from blindness (within the last 28 days).

Important note: The mobility component of PIP or DLA does not count for variation purposes.

Permitted Expenses

Certain costs incurred due to the child’s condition are classified as permitted expenses. These include:

Personal care and communication needs.
Mobility aids and domestic help.
Specialized medical equipment not provided by the NHS.
Home adaptations.
Heating, clothing, or laundry expenses related to the child’s care.
Special diets recommended by a medical professional.
Daycare, rehabilitation, and respite care.

Note: If a service or equipment can be provided by the NHS, the claim may not be approved unless delays in provision risk harming the child’s health.

Financial Assistance: What You Need to Know

If the Non-Resident Parent (NRP) or their household receives financial assistance for the child’s condition, this may reduce the amount of the claim. Sources of financial assistance include:

Grants or charitable funding.
Benefits such as DLA, PIP, or AFIP.

However, there are important caveats:

Only assistance related to the specific claim expense (e.g., personal care) will be deducted.
Payments received by someone outside the NRP’s household will not affect the claim.

Confidentiality and Exclusions

When processing a claim, certain information will remain confidential:

Medical evidence that could harm a party’s health if disclosed.
Personal information, such as addresses, that could reveal the location of a child or party.
Details of the child’s illness or disability, if confidentiality has been requested and it does not impact the claim's outcome.

Financial Thresholds

The good news is that there are no financial thresholds for ROC variations related to illness or disability. This means each case is assessed on its own merits, focusing on the expenses and needs of the child.

Final Thoughts

Navigating the process of claiming for a Relevant Other Child with an illness or disability can be complex, but understanding the rules and criteria can make it much easier. Ensure you keep detailed records of expenses and seek advice if needed to maximize your claim.

If you found this guide helpful, feel free to share it with others who might benefit.

Keywords:

Child maintenance
ROC variation
Disability claims
Long-term illness
Relevant Other Child expenses

Hashtags:

#ChildMaintenance #DisabilitySupport #ParentingGuide #ROCVariation #FamilyFinance

Suggested Search Terms:

How to claim child maintenance for a disabled child
ROC variation illness expenses
Disability benefits for Relevant Other Child
Financial support for long-term child illness