Question to the Department for Work and Pensions:

To ask the Secretary of State for Work and Pensions, what assessment she has made of the potential merits of ensuring that directors dividends are included in the initial calculation of child maintenance payments.

The 2012 Child Maintenance Service (CMS) moved from an assessment on a net income basis, used by the former Child Support Agency (CSA), to a gross income basis in order to simplify the calculation process. CMS assessments are based initially on gross income information received directly from HM Revenue and Customs (HMRC). As dividend payments are issued from a company’s annual profits after tax, they are not included in the initial child maintenance calculation.

For child support purposes, dividend payments are treated as unearned income, and can be taken into account via a variation application. Variations are specific types of changes which allow the CMS to look at some circumstances not covered by the basic maintenance calculation rules. If a variation succeeds the maintenance calculation will be adjusted accordingly. CMS can check HMRC data for dividend payments to support an application for a variation.

Taking information directly from HMRC allows us to capture a wide range of income types received by paying parents. Basing the assessment on gross income data has enabled the CMS to significantly speed up the set-up of new cases which can be key to securing regular payments.