How Does Furlough Or Redundancy Affect Maintenance?
Many readers will be surveying the gloomy economic outlook with trepidation over the summer. Job losses are forecast to rise sharply once the Chancellor’s furlough scheme winds down, with some very unpleasant consequences for consumer demand. It sounds as if tax rises are on the way (the Prime Minister declined to rule these out recently) and there is the sense that radical solutions may be required to get the country back on its feet. Perhaps wealth taxes? And what of that feared ‘second wave’ in the autumn…?
This blog examines what can or should be done about existing maintenance arrangements in the current climate (if you need information on the basics of maintenance, then you will find what you need in our earlier blogs ‘Child Maintenance Calculations and the CMS’ and ‘Spousal Maintenance: How Much and How Long Will it Last?’).
For couples who are separated or separating, this issue is particularly pressing: whether you are paying or receiving maintenance you will want to be able to budget with confidence. What can be done?
Fundamentally, be realistic. The ability to pay maintenance is not immune from the current economic headwinds, but nor can dependent spouses suddenly live off fresh air at a time when jobs are hard to come by. There is going to have to be a good deal of give and take as the situation unfolds. What follows are our top tips for navigating this difficult area:
Child Maintenance:
- Wherever possible, the first port of call is to try to agree child maintenance arrangements between you, reflecting the current uncertainties. Don’t forget, each of a child’s parents has a duty to provide support, not just the maintenance payer.
- If agreement is proving difficult, remember that (unless you fall within certain defined exceptions, such as earning more than £3k gross per week) your child maintenance arrangements will be governed by the Child Maintenance Service or CMS (what used to be known as ‘the CSA’), rather than by a court. The precise figure is arrived at by applying a formula to the payer’s gross income, after pension contributions. The number of nights any relevant children spend with the payer will affect the sum payable.
- There is a useful ‘child maintenance calculator’ on the gov.uk website (https://www.gov.uk/calculate-child-maintenance) which will point you in the right direction. You have to input the appropriate figure for the payer’s gross income, so you are perfectly free to take account of any recent or anticipated reductions in income, from being placed on furlough for example.
- Bear in mind, however, that this probably won’t be the approach taken by the CMS itself:
- Gross income will instead invariably be calculated by reference to a payer’s income as most recently declared to HMRC.
- This means that the system lacks the flexibility to respond as nimbly to the current circumstances as you may wish it to. For example, the CMS has the power to consider a payer’s current income only if it differs from that declared to HMRC by 25% or more, so presently furloughed workers on 80% of wages will not qualify.
- Whilst it may be tempting for the maintenance payee to continue receiving maintenance predicated on a level of income which the payer no longer earns, this will come out in the wash when the current year’s tax return, showing much lower receipts, is utilised to calculate next year’s maintenance dues – even if earnings have by then recovered to their previous levels.
- In the event the level of child maintenance payments really cannot be agreed, then either the paying or receiving party can apply to the CMS to determine the sum payable. As might be expected, reduced staffing levels is leading to delay in the processing of applications, and also in the enforcement of arrears.
Maintenance for a spouse:
- Again, do try to agree a mutually acceptable figure wherever possible. In doing so, take the long view: if you are adjusting maintenance down by a minimal amount to reflect a corresponding small reduction in the payer’s income, you risk forever tinkering with the sum payable when circumstances change in the future. This will put pressure on your relationship over time.
- On the other hand, a material change in a payer’s circumstances cannot simply be ignored. If temporary cuts to monthly budgets are to be made, it will probably make sense to target those areas of discretionary spending which have been made difficult by the conditions of lockdown: restaurants, foreign travel and so on.
- As an aid to reaching agreement, consider what a court would do. Unlike with most child maintenance issues, the Family Court retains a power, enshrined in statute, to alter the sums payable where appropriate. In considering whether to do so, the court will take into account the most up-to-date financial information which is available. Taking expert legal advice as to your specific circumstances is key.
- Do not imagine a court would take time scrutinising every line of a budget. There is nearly always a broad brush evaluation of (i) what is needed and (ii) what is affordable.
- Avoid court proceedings unless there is no alternative. The Family Court is under enormous pressure thanks to the demands of the pandemic and all families are specifically encouraged to take up alternative means of resolving disputes wherever possible. Consider a One Couple One Lawyer service such as ours, where you can obtain expert legal advice together as to what a court would do in your particular circumstances, which you can then use to reach an outcome which is fair to both of you.
If you have more questions about this topic or any other legal issues arising on divorce or separation, please do get in touch as we are always happy to help. You can call us on 0203 488 4475 or email contact@thedivorcesurgery.co.
Author Name: Editor
Published content by The Divorce Surgery Editorial Team.
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