Child maintenance: My partner’s ex-husband has for years declared little or no earnings on his tax return
My partner’s ex-husband is a self-employed tradesman who pays little or no child maintenance.
The Child Maintenance Service are so poor that they write endless letters but do nothing else as apparently the ex-husband has little or no earnings.
The earnings are determined by his tax returns in which he has for years declared little or no earnings.
Currently he declares around £300 a month earnings, rents a small three-bed house, runs a van, has a phone, buys his food, funds his cannabis, spends a pointless fortune on kids’ Christmas presents and so on. All from his £300 a month.
I used to report him to HMRC using the online report form but they do nothing.
HMRC essentially don’t seem to chase tax avoiding low earning self-employed people, probably because they only think about cost versus reward at a financial level and not wretches like my partner’s ex-husband.
My question essentially is, how do we get HMRC to do anything? It isn’t just the unfairness of why should we pay when he does not.
The knock-on effect of the tax evasion filters down through many other strands.
You see it all the time in sob story TV programmes which always feature a woman bringing up kids on her own with no money blaming the Government and they never ever ask, what about the wretch or wretches who fathered the kids?
SCROLL DOWN TO FIND OUT HOW TO ASK HEATHER YOUR TAX QUESTION
Heather Rogers replies: Unfortunately, you and your partner are not the only people to find yourself in this situation.
In a case a couple of years ago, a company director hid his six-figure salary, claiming he was only earning £175 per week.
He was charged after an investigation by the CMS Financial Investigation Unit with fraud by misrepresentation, and sentenced and ordered to pay the child maintenance owed.
Here, I will explain how the child maintenance system works, and how it relates to declaration of income and potentially tax evasion, before turning to your specific situation and what action you and your partner might take now.
HEATHER ROGERS ANSWERS YOUR TAX QUESTIONS
What is child maintenance?
Child maintenance covers how your child or children’s living costs will be paid when one of the parents doesn’t live with the child.
It is paid when you’ve separated or even if you were never in an actual relationship. There must be a child maintenance arrangement in place if your child is under 16 or under 20 if they are still in full-time education.
Both parents are responsible for the costs of raising the child, regardless of whether they see them. Arranging to see your child is a separate issue.
The Government explains how child maintenance payments are calculated here.
Sometimes things don’t work out and either the paying parent doesn’t pay or tries to avoid paying the right amount by not declaring all their income.
HMRC provides the basis of the income for the assessment. This could be tax returns income, employment income and income from a business.
It is, however, just the basis. You can also ask for other income and expenses to be taken into account.
What if you think the child maintenance is wrong?
If you disagree with a decision, you can ask for it to be looked at again, or may be able to go straight to appeal. Appeals are heard by HM Courts and Tribunals Service.
If you think the income declared by the paying parent is wrong, you should challenge and raise it with the CMS. They have a team called the CMS Financial Investigations Unit which may look into it further.
Below are examples of when FIU action may be initiated. Cases are referred by CMS caseworkers on behalf of parents receiving child maintenance.
– A paying parent is self-employed, a partner or a company director, their declared income is disputed by the receiving parent, and there is a history of income or information to support this.
– A receiving parent believes the paying parent may be diverting income, for example to a new partner employed by their business.
– A paying parent fails to provide earnings information.
– A paying parent is not employed and not claiming benefits.
– A paying parent knowingly supplying false information or it is suspected that the paying parent has supplied false or incomplete information
How do people divert their income to avoid paying child maintenance?
People in certain positions are able to control or influence either the manner by which they are paid, and/or the amount of the pay they receive.
Those with the most opportunity are company directors who are also shareholders in their own company and those who are self-employed.
Company directors can determine the level of their salary, as well as any dividends that are paid to them, especially if they are sole shareholders/directors.
Or, they may take a director’s loan from the company instead of receiving dividends for a period of time.
Self-employed earnings relate directly to the profit and loss of the business – income less allowable expenses and certain allowable reliefs.
If the person is unscrupulous, they can affect the declared profit by incorrectly reporting business expenses, or failing to declare payments received from customers.
This is tax evasion and potentially money laundering as well, as I discussed in my recent tax evasion article. You should certainly report this to HMRC, if you believe this to be the case.
A parent could also divert income to a third party, for example a new partner, by paying them a wage or making them a partner or director in their business.
The majority of the income then goes via the new partner and then the paying parent declares a small level of income to the CMS.
Most people paying child maintenance report their earnings correctly and do not engage in such practices, but nonetheless such means do exist and will be taken advantage of in some cases.
What powers does the CMS Financial Investigations Unit have?
The CMS is administered by the Department of Work and Pensions.
Under the Child Support (Enforcement) Act 2023, the DWP can implement sanctions on paying parents who avoid paying maintenance.
CMS enforcement action includes seizing assets, including bank accounts, and forcing property sales. They can even now remove passports and driving licences. They no longer need to apply to the court for a liability order.
What action can you and your partner take now?
In your case, it is not really HMRC that will help you. It’s the CMS that needs to investigate your partner’s ex-husband, and from what you have advised in your question, there are enough grounds for them to do so.
They could even be investigating already, if suspicions have been raised, as they wouldn’t advise you about it, nor would they advise him for obvious reasons.
In fact, the suspected tax evasion is a separate matter. The main issue here is that you suspect that the ex-husband’s income is not correctly reported for child maintenance payments.
Here are the options open to you and your partner, whom you should consult on what further action you take. The most important thing when making a report on a matter like this is that you and your partner stay safe.
– You can make another report to HMRC if you believe tax evasion is occurring. You can call HMRC as well. You don’t have to make a report online.
But remember, they won’t advise you of any investigation they carry out nor update you with any details.
If they have your personal details, they could contact you if they think you may have any further information, although if you make the report anonymously then they can’t.
– You can also go to the CMS and push them regarding an investigation on their part. Credible information that something is wrong includes that the income and the paying parent’s lifestyle do not match.
Here is a link to the House of Commons library, which gives more information on the CMS’s investigation process.
– If you can afford to, speak to a lawyer who specialises in child maintenance advice, usually a family law practice.
– If you believe criminal activity is taking place, then do report it to the police.
Ask Heather Rogers a tax question
Tax expert Heather Rogers answers our readers’ questions
Heather Rogers, founder and owner of Aston Accountancy, is our tax columnist. She is ready to answer your questions on any tax topic – tax codes, inheritance tax, income tax, capital gains tax, and much more.
If you would like to ask Heather a question about tax, email her at [email protected].
Heather will do her best to reply to your message in a forthcoming monthly column, but she won’t be able to answer everyone or correspond privately with readers. Nothing in her replies constitutes regulated financial advice. Published questions are sometimes edited for brevity or other reasons.
Please include a daytime contact number with your message – this will be kept confidential and not used for marketing purposes.
If Heather is unable to answer your question, you can find out about getting help with tax here, including sources of free professional advice if you are elderly and/or on a low income.
You can also contact MoneyHelper, a Government-backed organisation which gives free assistance on financial matters to the public. Its number is 0800 011 3797.
Heather gives tips on how to find a good accountant here, including when to seek help, hiring the right type of firm and typical costs.
