Reply to: Dealing with the CSA

[Mojito]

Maintenance under JSA

Thanks for the responses.

It wasn't in my thoughts to include money retained in the business - it'll be under 50k at the end of the year I would imagine anyway - because as already suggested, that would be used during lean times and I could continue paying the set amount. Surely that is better... and means no disruption to money that is potentially relied upon.

Although I suppose the counter argument might be that if lean times rarely or never come, there is never an opportunity to balance it out.

Interesting that they can take it into account.

When lean times do come, presumably you'd put yourself into the 'system' and claim JSA. It may be worth pointing out to the ex that those nice people will drop CM down to £5 immediately when you qualify for JSA. If the CM is a fundemantal part of the ex's household income (i.e. its paying the mortgage) then you may get a rational response. Its all swings & roundabouts.....

Good luck

[Contractor UK]

Contractors' Questions: Does the CSA consider dividends? :: Contractor UK - Contracting News and Guides Article on dividends may help?

[hariseldon]

Thanks for the responses.

It wasn't in my thoughts to include money retained in the business - it'll be under 50k at the end of the year I would imagine anyway - because as already suggested, that would be used during lean times and I could continue paying the set amount. Surely that is better... and means no disruption to money that is potentially relied upon.

Although I suppose the counter argument might be that if lean times rarely or never come, there is never an opportunity to balance it out.

Interesting that they can take it into account.

[escapeUK]

I recently attended a Tribunal as a NRP, and company retained money WAS taken into account, however expenses were allowed...

A Tribunal can consider if it is "just and equitable" to retain profits in a Limited Company.

Im glad I'll never be in such a position. But isnt is strange how they look at total earnings, rather than an essential amount of money. If a child needs £400 a month to live a nice life, that should be the maximum awarded shouldnt it? What does the amount the missing parent earns have to do with anything? Do children of consultants needs more than children of bin men somehow?

Good luck.

[castoff101]

I recently attended a Tribunal as a NRP, and company retained money WAS taken into account, however expenses were allowed...

A Tribunal can consider if it is "just and equitable" to include retained profits left in a Limited Company.

Of course if you can sort something out with the PWC you may not have not face such a conclusion!

Good luck.

[ASB]

Is that actually what happens, or is that what you THINK should happen? you say it is subjective, so are you saying you think it should be taken into account? or that the CSA can take it into account should they decide to?

It's not income yet surely.

Once it becomes income, only then should it be taken into account I would have thought.

In terms of retained income the CSA can only take it into account should the PWC request a variation. I am not aware of any cases where it has been taken into account but I expect there are some somewhere. This will only be because it is viewed as an asset of the NRP.

However all cases are different, it depends why it is being retained and how significant it is. Under the current scheme for example somebody who controls their own income does have the ability to a certain extent to defeat the intention of the system. This could be achieved by paying no salary, no dividends and stuffing the lot in a company pension. Do it right and CSA payments will be zero. Obviously this is an extreme example.

The other side of that though is that the legislature has a responsibility to ensure it legislates to meet its intentions, so the view that it is the fault of the system that this is allowed to happen is equally valid.

So, yes I do think it should be taken into account. But that does not meant that I think it should always be counted. If it is always counted then there will be circumstances when it effectively becomes income - and thus charged to CSA payments - twice.

[MaryPoppins]

Is that actually what happens, or is that what you THINK should happen? you say it is subjective, so are you saying you think it should be taken into account? or that the CSA can take it into account should they decide to?

It's not income yet surely.

Once it becomes income, only then should it be taken into account I would have thought.

Yes, I think that's the case. I understood that year end accounts were reviewed for the CSA to assess what was drawn from the company.

I must admit though, I found it very difficult to nail down what their process actually is with regard to assessing Company Directors.

[jmo21]

The last being effectively the portion of "your" income which you did not receive. The last element of course is somewhat subjective and would depend upon your personal perspective - especially when you consider it may end up being used to pay dividends in lean times.

The point with the last bit is say you were billing 150k per year, paying small salary and 50k dividends thus retaining 100k (gross) which is not finding its way to you is it really right that this should not be included in what you pay child maintenance on?

Is that actually what happens, or is that what you THINK should happen? you say it is subjective, so are you saying you think it should be taken into account? or that the CSA can take it into account should they decide to?

It's not income yet surely.

Once it becomes income, only then should it be taken into account I would have thought.

[GillsMan]

The point with the last bit is say you were billing 150k per year, paying small salary and 50k dividends thus retaining 100k (gross) which is not finding its way to you is it really right that this should not be included in what you pay child maintenance on?

Yes, IMO. Simply because if it's genuinely not finding its way to you, then it's not "your" money, it's your business money. If you put that money back into the business and the business becomes more profitable as a result, surely this would result in drawing higher dividends which, rightly, would be counted by the CSA.

But IMO, if it's company money it's company money, not my personal money. I see your point though tbf.

[ASB]

Thanks for the responses guys. I've a had a read of those threads and not quite sure what to think really - it seems as though it's a bit of a nightmare and no one really has any others.

One question I still do have though - I take a very low salary which is topped up with dividends.

I was thinking of just saying up front that I'd like them to consider dividends and salary perhaps. Is that a good idea or not?

Guidance has recently been updated. See here, http://www.csa.gov.uk/en/PDF/leaflets/new/CSL303.pdf page 30. But also page 46.

The PWC can also apply for a variation where the NRP has assets excluding house of > 65k. This can sometimes provide a "deemed income" (see P29). There could be an argument that cash in the business is part of your assets (it provides value to what your shares in the business are worth).

From my personal view I would suggest that (assuming you are using the "net" (15/20/25%) scheme rather than the emerging "gross") a relevant income would be:-

+ Net salary
+ Net dividends
+ Net increase in retained funds (i.e. retained profit for year) x your shareholding

The last being effectively the portion of "your" income which you did not receive. The last element of course is somewhat subjective and would depend upon your personal perspective - especially when you consider it may end up being used to pay dividends in lean times.

The point with the last bit is say you were billing 150k per year, paying small salary and 50k dividends thus retaining 100k (gross) which is not finding its way to you is it really right that this should not be included in what you pay child maintenance on?

[Wanderer]

I was thinking of just saying up front that I'd like them to consider dividends and salary perhaps. Is that a good idea or not?

Sounds like you are trying to do the right thing but you have to be careful as they may not quite understand what it's like to be self employed. What if you are benched for a while with no income or you take a dramatic drop in income and you are paying out a fixed amount based on a contract you had when the arrangement was made? Make sure they don't just look at the last month's contract fees and figure it out from that because it may not represent your actual income over a full year. You might be best to get some professional advice so that you don't accidentally get yourself into a difficult and inflexible arrangement which doesn't actually benefit any of the parties involved.

Good luck!

[hariseldon]

Thanks for the responses guys. I've a had a read of those threads and not quite sure what to think really - it seems as though it's a bit of a nightmare and no one really has any others.

One question I still do have though - I take a very low salary which is topped up with dividends.

I was thinking of just saying up front that I'd like them to consider dividends and salary perhaps. Is that a good idea or not?

[Wanderer]

I know this topic has come up before on these forums, but I couldn't quite seem to find the threads using search, so thought I might try asking again.

Unfortunately searching for "CSA" but it won't work because 3 letters is too short/common. As a work around, try googling for site:forums.contractoruk.com CSA and you'll find a few discussions.

Good luck!

[MaryPoppins]

My understanding is that, by default they will only look at your salary. If your ex puts in a formal request, they can take into account your dividends (but she has to request this). As salary + dividends = personal income, that's all they can check afaik. Daily rate and money in your company accounts isn't any of the CSA's business, since that isn't "your" money, but your Ltd Co's money.

And here's a helpful topic on the subject: http://forums.contractoruk.com/accou...intenance.html

As GM says, they are meant to look at your 'income' as a whole, i.e. dividends and salary.

[GillsMan]

My understanding is that, by default they will only look at your salary. If your ex puts in a formal request, they can take into account your dividends (but she has to request this). As salary + dividends = personal income, that's all they can check afaik. Daily rate and money in your company accounts isn't any of the CSA's business, since that isn't "your" money, but your Ltd Co's money.

And here's a helpful topic on the subject: http://forums.contractoruk.com/accou...intenance.html