Consultation outcome

Government response: Child Maintenance: modernising and improving our service

Updated 14 March 2022

Glossary of terms

Term	Definition
Child Support Agency (CSA)	Administrative body for the 1993 and 2003 schemes of child maintenance.
Child Maintenance Service (CMS)	Administrative body for the 2012 scheme of child maintenance.
Paying parent	The parent who does not have main day-to-day care of the qualifying children and is responsible for the payment of child maintenance. Previously known as the non-resident parent.
Receiving parent	The parent who has main day-to-day care of the qualifying children and should receive child maintenance. Previously known as the parent with care.
Unearned income	Certain taxable income such as income from savings and investments, land or property or other miscellaneous sources.
Her Majesty’s Revenue and Customs (HMRC)	UK’s tax, payments and customs authority.
Income tolerance	Sets the level a parent’s income needs to change to enable their calculation to be re-assessed.
Deduction from earnings Order (DEO)	A method to secure payments of child maintenance and, or, arrears direct from a paying parent’s salary. The employer deducts the amount directly from salary at source.
Variation	Variations allow some circumstances to be considered which are not taken into account in the normal maintenance calculation rules. If agreed to, a variation can lead to an adjustment to the maintenance calculation.
Child Maintenance Options	Free service provided on behalf of the Department for Work and Pensions, giving impartial information and support to help parents make informed choices about child maintenance. Parents must have a conversation with Child Maintenance Options before they can apply to the CMS.
Family Based Arrangement (FBA)	Child maintenance arrangement which parents agree between themselves, without the involvement of the statutory maintenance scheme. An FBA can involve financial and/or non-financial support.

Ministerial foreword

The Child Maintenance Service (CMS) was introduced in 2012. The reformed service is designed to overcome many of the problems associated with the Child Support Agency (CSA) which was failing families because it was complicated, did not encourage collaboration, and was not providing value for taxpayers.

The reformed Child Maintenance Service is designed to increase levels of cooperation between separated parents and encourage parents to meet their responsibilities to provide their children with the financial support they need to secure better outcomes in life.

Many parents feel able to make these arrangements between themselves without State intervention; but for those who cannot make a family based arrangement, the CMS administers a statutory scheme for parents who need it.

We recently consulted on a range of proposals to improve fairness for both parents and get more money to children. I am grateful to the range of stakeholders, parents and members of the public who took time to respond to our consultation. I am also delighted to have received suggestions for further improvements to CMS beyond those laid out in our consultation and going forward, we will explore how we can give these suggestions due consideration.

We received broad endorsement for the proposals included in the consultation. This document sets out how I intend to move forward with these proposals, having considered the responses.

Executive summary

1. On 18 June 2021 the Government published Child Maintenance: modernising and improving our service.

2. The consultation closed on the 6 August 2021. 123 responses were received: 8 from organisations and 113 from private individuals, of which 30 identified themselves as paying parents and 40 as receiving parents. A full list of organisations who responded can be found at Annex A.

3. This public consultation put forward the following proposals:

• including unearned income held by HMRC in CMS calculations alongside paying parents’ earned income
• easing the evidential requirements for self-employed paying parents where a change that has breached the income tolerance has been reported
• extinguishing small volumes of very low value debt (£6.99 and under) where the maintenance calculation has ended but there remains an outstanding debt and the value of the debt is substantially less than the cost of collecting it
• extinguishing arrears where:
  • child maintenance has been deducted from a paying parent’s earnings where their employer has gone into administration before the payment has been passed to the CMS; and
  • we are unable to recover the outstanding arrears from the trustee handling the company’s insolvency
• sending CMS notifications only via a digital method where a customer has told us this is their preference
• requiring the following organisations to provide information when requested to do so in a timely manner: private pension providers, academy proprietors, the Motor Insurers’ Bureau and all types of companies that offer, promote or sell investment management services or facilitate share trading

4. The consultation invited responses to 10 questions covering our proposals.

5. Not all respondents chose to answer the specific questions asked, and many preferred to provide their views on the proposal in general. Where possible we have tried to reflect these responses in the appropriate sections. A large number of responses received from parents were about individual case circumstances, and were therefore outside the scope of the consultation.

6. This publication summarises the main points made by respondents and provides the Government’s full response to them. It also sets out how we will take these proposals forward in order to achieve fairness for all and get more money to children.

7. The overall response to our proposals for improving child maintenance calculations were positive. The proposal for us to include unearned income automatically when we initially calculate a liability was welcomed (at the moment liability is calculated by reference to historic income only, and the inclusion of unearned income requires a request for a variation to be raised).

8. Respondents offered a range of views on the proposals to:

• allow the CMS to re-assess a maintenance calculation where a self-employed parent’s income has changed before the end of the relevant tax year; and
• make a maintenance calculation based on a self-employed paying parent’s projection of their income when newly self-employed for the remainder of the tax year, until information could be obtained from HMRC at the annual review
• make a calculation based on a self-employed paying parent’s declaration their self-employment has ceased

9. There was a balanced number of responses relating to proposals to extinguish arrears balances in cases where there are small volumes of low value debt.

10. We proposed that the upper limit proposal was set at £6.99. This received mixed responses as there was apparent misunderstanding leading to concerns that any level of debt should be extinguished. There were also arguments presenting the case to increase the upper limit of debt to be extinguished.

11. Respondents were generally in favour of our proposal to extinguish arrears balances where an employer becomes insolvent, although some receiving parents expressed concern. There appeared to be confusion around the distinction between paying parent owned companies and employers that have taken deductions prior to becoming insolvent.

12. Overall, the proposals to serve letters via a digital method received a positive response although respondents were clear that the option to choose a preferred communication method should remain.

13. The proposal to expand the list of organisations that have a duty to provide information to the Secretary of State was mostly positively received.

Responses

Unearned Income

We asked

14. Question 1. What is your view on including a paying parent’s unearned income alongside their earned income in the initial CMS calculation, rather than only when a variation is requested?

You said

15. The response to this question was predominantly positive, confirming that this would provide a more accurate reflection of the paying parent’s overall income. Some paying parents disagreed with the proposal, citing that they were potentially saving for the future needs of their children and for their retirement. Other respondents voiced concern that it may have a disproportionate negative effect on paying parents on low incomes.

What we are doing

16. Where unearned income is identified at the initial case set up stages, it will be included in the paying parent’s income for the calculation at that point.

17. In cases where a receiving parent provides information regarding additional unearned income for the paying parent in the period between the implementation of the proposed change and the next annual review, we will ensure they can request a variation be raised. This will address concerns about receiving parents with ongoing cases having to wait until the case annual review to have a paying parent’s unearned income taken into account.

18. Where a variation has been requested and is successful within the period of time covered in paragraph 17, the calculation will be effective from the date the change is reported.

Self-employed evidential requirements

We asked

19. Question 2. What are your views on our plans to make a maintenance calculation based on a paying parent’s statement of their estimated income for the remainder of the tax year, until information can be obtained from HMRC at the annual review?

You said

20. Although generally positive responses were received in relation to this proposal, some respondents had concerns about allowing paying parents to project their earnings as newly self-employed. They stated that it could be open to abuse by the paying parent and would require CMS to implement assurance activity in relation to the duty of the paying parent to report any changes in a timely and accurate fashion.

What we are doing

21. Currently where paying parents wish to report an estimated income figure from a new self-employment, or report that self-employment has ended, they are required to provide CMS with specific evidence to support this. Newly self-employed parents must provide profit and loss accounts. Paying parents reporting self-employment has ceased must provide specific evidence from HMRC, the business has ceased.

22. The change will allow paying parents to provide a statement with their projected earnings for newly self-employed and a statement advising their self-employment has ended.

23. Our interface with HMRC at annual review will pick up any discrepancies with information reported by paying parents. Any challenges made by receiving parents will be considered and where there are reasonable grounds to doubt the information provided, further investigations may be undertaken. Where we are satisfied that there has been a misrepresentation of, or failure to disclose information relating to the new self-employment, a revision to the earlier decision may be appropriate.

24. Whilst we accept that using an estimation of projected profit cannot guarantee a wholly accurate maintenance liability, the same is true of the CMS current evidential requirements. This change will bring CMS in line with current HMRC verification requirements.

We asked

25. Question 3. What are your views on our proposal to re-assess a maintenance calculation where a self-employed parent’s income has changed before the end of the relevant tax year?

You said

26. Many respondents expressed concerns that allowing paying parents to report such changes in self-employed income could be open to abuse by the paying parent. They suggested declarations by the paying parent would require CMS to implement stringent assurance activity to ensure changes are reported in a timely and accurate fashion.

What we are doing

27. We will not be pursuing this proposal and instead will investigate alternative ways to improve the calculation process for self-employed parents, which minimise the risk of fraudulent activity and potentially inaccurate maintenance calculations.

Extinguishing low level debt

We asked

28. Questions 4 and 5. What are your views on our plans to extinguish arrears balances in cases that meet the proposed requirements outlined in this paper? What are your views on our proposal to set the maximum limit for such cases at £6.99?

You said

29. Although there was general agreement with plans to extinguish low levels of debt in some cases, some reservations, possibly arising from a misunderstanding of the proposal, were that the CMS was looking at writing off any arrears, no matter how small.

30. There were several differing opinions around the threshold at which the decision to extinguish the debt should be made. Some thought the threshold too high and others too low.

What we are doing

31. Extinguishing low level debt will only be carried out on arrears only cases where:

• the maintenance calculation has ended
• there remains a debt which is below the threshold of £6.99
• the paying parent cannot be contacted; and
• standard trace actions prove unsuccessful

32. We have considered the impact of extinguishing such low levels of debt on both parents and have settled on a threshold that strikes a balance between:

• continuing to encourage paying parents to fulfil their child maintenance obligations
• enabling the CMS to focus its efforts and resources for debt collection on cases where the cost of pursuing that debt is more proportionate, and
• ensuring the impact on children of uncollected maintenance is kept at a minimum

33. Setting the threshold higher would give the wrong message to paying parents about their obligations. As the flat rate for child maintenance (which is the minimum amount a parent is expected to pay to meet their statutory duty to maintain their children) is £7 per week, setting the threshold just below that amount is, we consider, the best way to strike that balance.

34. Recent CMS costings provided to the National Audit Office show the estimated average annual running costs per case are around £470 to £480. Which averages out to £9 per week, which is higher than £6.99. Where collection is clearly achievable the CMS will utilise its resources to collect.

Maintenance not collected when an employer becomes insolvent

We asked

35. Question 6. What are your thoughts on our proposal to extinguish arrears balances in cases that meet the proposed requirements outlined in this paper for paying parents who have made a payment via a deduction from earnings order and their employer has become insolvent before paying the amount deducted to the CMS?

You said

36. There was concern that the CMS is not able to assert priority claims over the collection of paying parent deductions from employers that have become insolvent, and a misunderstanding that where paying parents were also employers, they could divert assets and willingly close the business as a means to avoid paying child maintenance.

What we are doing

37. These proposals relate to cases where the paying parent is an employee of a company that has begun insolvency proceedings and in most cases will involve single payments deducted from the parent’s salary but not paid to the CMS. It does not refer to self-employed parents or those who try to avoid their ongoing obligations by diverting assets.

38. Under current arrangements, any claim made by the CMS to an insolvency practitioner can only be made as an unsecured creditor and as such any claim ranks equally alongside other unsecured creditors. We plan to investigate whether claims made by the CMS can be given preferential status, meaning any debts would be paid in preference to the general body of unsecured creditors.

CMS notifications to be sent, received and accessed digitally

We asked

39. Question 7. What are your thoughts on our proposal to use all forms of communication appropriate to customer needs including digital?

You said

40. Respondents were generally in favour of improving communication delivery through the use of digital methods, as long as they were appropriate and did not disadvantage any customer.

41. Some concerns were voiced in relation to the possible impact on customers going through difficult times, with portal issues causing access problems and occasionally language barriers. In these instances, communication via post would be preferable.

What we are doing

42. CMS legislation currently commits the CMS in certain instances to communicate via post with its customers.

43. We aim to ensure that the CMS has the discretion to choose the right channel to communicate with its customers, wherever possible and in line with customer contact preferences, for example serving its customer notifications digitally where the customer has stated self-service as their contact preference.

44. As such, we intend to make changes in legislation to enable more CMS notifications to be sent, received and accessed digitally, when it is considered appropriate to do so. This will allow the CMS to communicate with customers through digital channels and enable notifications which are currently legally required to be posted to be sent out via digital mechanisms.

45. Letters containing information about serious consequences if parents fail to make outstanding child maintenance payments, would continue to be via a postal method, as well as a digital method for customers who have told us they would prefer to communicate with us via a digital method.

46. CMS recognises that customers with accessibility requirements which prevent or discourage them from using online services would need a suitable alternative route for notifications for example postal. Furthermore, CMS recognises that there is a group of our customer base with which the CMS will have difficulty communicating in cases of non-compliance. We will work to strengthen and develop existing procedures that will not compromise enforcement, as well as continuing to offer a range of alternative format communications.

We asked

47. Question 8. What are your views on our plan to extend our existing online service for employers and look to communicating with third parties digitally in the future regarding Child Maintenance cases?

You said

48. Overall, there was support for this proposal from the respondents that expressed an opinion on this.

What we are doing

49. We wish to future proof the legislation so it is not restricted to a specific method of communication, but to allow both postal and electronic communication with employers and third parties.

50. We may contact employers through the Child Maintenance Employer Self Service site which allows employers to notify the CMS of various changes and to ask questions.

51. We may contact third parties via email.

52. This would be in keeping with our commitment to reduce the burden on employers, who have expressed that they would prefer us to send them communications via a digital method.

Information Regulations

We asked

53. Question 9. Do you have any comments in relation to the inclusion of private pension providers, academy proprietors, the Motor Insurers’ Bureau and all types of companies that offer, promote or sell investment management services or facilitate share trading to the list of persons and organisations who have a duty to provide information to the Secretary of State?

You said

54. The proposed introduction of this new power was generally welcomed by respondents. Respondents felt this would prove an effective power but advocated exercising caution in the use and storage of the data in relation to GDPR.

What we are doing

55. We intend to proceed with the addition of private pension providers, academy proprietors, the Motor Industry Bureau and all types of companies that offer, promote or sell investment management services or facilitate share trading to the list of those from whom the CMS can require to provide information relevant for the calculation, collection and enforcement, of child maintenance. By including these organisations, it makes the process for them to supply requested information to the CMS far simpler. Previously, an inspector would have had to visit their premises. Now they will be able to respond to information requests by secure digital means. This is far more convenient and less intrusive for these organisations.

56. Our powers to request information are used when gathering information for the purpose of:

• tracing the paying parent
• calculating maintenance
• maintaining the case; or
• enforcing child maintenance arrears

57. Any personal data provided or used by the CMS is governed by the General Data Protection Regulations (GDPR).

58. We will provide reassurance to customers and public in relation to concerns raised about the processing and retention of information provided under any new powers that we are working with GDPR policy and the Information Commissioner’s Office to ensure that we are fully compliant.

We asked

59. Question 10. Do you have any comments in relation to the inclusion of academy proprietors in the list of persons and organisations who have a duty to provide information to the Secretary of State when there is already a data sharing duty between an academy proprietor and local authorities?

You said

60. Of those that responded to this question, the overwhelming response was positive in allowing the inclusion of academy proprietors in the list.

What we are doing

61. As per our response to question 9, we will provide reassurance to customers and public in relation to concerns raised about the processing and retention of information provided under any new powers that we are working with GDPR policy and the Information Commissioner’s Office to ensure that we are fully compliant.

62. We aim to progress this change, gathering data that will help us to contact paying parents, and if necessary, to take enforcement measures in cases of non-compliance.

Points raised outside the scope of the consultation

63. There were several points raised by respondents that were not covered by the proposals laid out in the consultation and these have been documented. The areas covered were as follows.

Shared care

64. The general feedback regarding shared care was that the current rates for reduction to child maintenance calculations are unfair on the paying parent.

65. Numerous respondents mentioned that shared care was being used by the receiving parent as a means of control against the paying parent when disagreements arise in the case.

66. The distinction between equal shared care and equal day to day care seemed to be a key point of tension between parents. In particular, we are aware that our information on equal shared care can be misleading and unclear for our customers. With this in mind we are keen to look at improving our use of terminology, signposting and the provision of resources to help all separated parents come to an agreement on shared care (regardless of their involvement with the CMS).

67. Several responses stated they experienced a breakdown of access to children after a CMS case has been opened.

Gross v Net Income

68. A number of respondents felt that calculating maintenance based on the gross income of the paying parent as opposed to the net income, was not reflective of take home pay. Several paying parents had company cars and felt they were being unfairly assessed due to the tax implications of them.

Receiving Parent Income

69. Several paying parent’s responses expressed concerns that the receiving parent’s income or earnings was not taken into consideration when calculating the amount of maintenance due. Several paying parents stated that they were being placed in financial hardship while they felt the receiving parent was in a far better financial position.

Fraud and Lifestyle Inconsistent

70. Respondents were also concerned that receiving parents were no longer able to apply for a variation to the maintenance calculation where it was evident that the paying parent’s lifestyle was inconsistent with their declared income. Multiple responses stated that the paying parent’s income could in no way support the lifestyle they had. Respondents suspected fraudulent declarations by paying parents, in relation to their income and earnings to drive down the maintenance calculation. Numerous examples were given of alleged fraud being carried out by the paying parents.

25% Tolerance

71. A small number of responses disputed the 25% tolerance on income being used, citing recent furlough and income changes. Suggestions are that this should be lower to allow for more accurate calculations to be implemented.

Reciprocal Enforcement of Maintenance Orders

72. Two responses suggested that the CMS should be working more closely with REMO to achieve results in pursuing paying parents who had moved abroad and were therefore out with CMS jurisdiction.

Next steps

73. We are planning to make changes in secondary legislation as parliamentary time allows, to bring into force changes to:

• the Child Support Information Regulations 2008 to expand information regulations to include private pension providers, academy proprietors, the Motor Insurers’ Bureau and all types of companies that offer, promote or sell investment management services or facilitate share trading
• update all the CMS regulations that deal with communications, to enable the Secretary of State to serve notice or notifications to customers and third parties, such as employers, in writing by post or by electronic means

74. We plan to make changes in regulations to unearned income, to extinguish low level debt and maintenance not collected when an employer becomes insolvent, at a later date.

Annex A

Organisations who responded to the consultation

Gingerbread
Families Need Fathers (FNF)
Law Society
Family Law in Partnership (FLiP)
National Association for Child Support Action (NACSA)
Motor Insurers’ Bureau (MIB)
Public and Commercial Services Union (PCS)
Information Commissioner’s Office (ICO)