Blog 6: In this blog I will discuss the liability assessment calculation process and the maintenance appeal process
Before I begin with the blog, I thought it would be appropriate to give an update on the progress of my on-going eight-year complaint which is under final review with the Parliamentary & Health Service Ombudsman. The Ombudsman’s decision is imminent and although I am not at liberty to go into the detail of the case for legal reasons, I am hopeful that the Ombudsman will provide a more meaningful and objective finding than was previously presented.
I should have some positive news within the next 10 days so you will need to watch this space for the update.
Background to my financial circumstance
As previously detailed in blog 3, my personal circumstances had been severely hit by the recession caused by the credit crunch. I had been out of work from January 2009 only just returning to employment in July of that year. I was five months behind in the mortgage, I was in arrangements on all my credit and loan agreements, I had not taken a wage from the business because I had reached my bank overdraft limit and I had just been served a self-assessment tax demand for £28,000 and a £32,000 demand in respect of corporation tax.
As you may recall from my earlier blog, in August 2009 the CSA called me out of the blue to advise that a maintenance request had been received from the PWC and according to them her request was valid. I advised that I had a clean settlement break agreement (Minute of Agreement [MoA]) and did not believe I was due any maintenance other than voluntary contributions.
Acquiring the financial information to calculate the assessment
When first contacted by the CSA I had just started working in Edinburgh. I advised that because of my straitened financial circumstances, I only returned home to London every 2/3 weeks, but when I did I would forward the MoA for their consideration.
I obliged this request on my next home visit and at the same time I sent the Agency my personal and business bank statements that evidenced that no money had passed through my account since January of that year. For a month, I heard nothing other than to be told that the PWC had a valid claim and that my clean settlement break was invalid from a child maintenance perspective.
I had to wait until the 20th October 2009 when I received an assessment calculation which I have attached. I am not stupid when it comes to calculations, but I could not make head nor tail of these figures, nor how they were derived nor how the assessment was calculated.
To my mind, I had three issues with the assessment. The first was that as the assessment was in respect of my third child, I was struggling to understand why the Agency was applying a 15% rate of earnings which is reserved for your first born. As I had paid maintenance since 2004 for all three of my children I thought it ridiculous to be assessed on my third child as though he were my first.
According to the Agency they can because they define the first child as being the first child notified to the Agency for which a valid claim is made. Does this therefore mean that it is technically possible for a Parent With Care (PWC) who being in a similar position of having three children, could in theory make an initial single claim for the youngest child, thereby securing 15% from the Non-Resident Parents [NRP] earnings for what is likely to be the longest maintenance period and thereafter make a secondary claim for the eldest and second eldest child which only secures 10% of the NRP’s income?
My second issue was that I had no idea how the assessment figures were derived. I knew I had not been in receipt of income. I also knew that I had no savings. As a consequence, my liability calculation should have been zero.
My third issue was that my clean break settlement had just simply been set aside. A clean break settlement that was still seeing me pay up the PWC’s debts which had been transferred to me at the time of the MoA coming into effect.
By way of update, my issue regarding my 3rd child being assessed at 15% of my income rather than 10%, I concede that the legislation does allow the Agency to apply the higher rate. Personally I think that this is unfair, particularly if you have paid more than the Agency would have demanded as I had done through the earlier voluntary maintenance arrangement that was in place pre-clean break settlement.
With regard the assessment calculation, I wrote to the Agency multiple times asking them to explain how the variation was calculated and it was not until the 07th December 2009 that the Agency advised me that the variation applied was in respect of a dividend payment I had declared to HMRC.
This dividend is a key consideration throughout my complaint, so it is perhaps worthwhile explaining how it came into being. As part of the MoA in October 2007 I had agreed to pay the PWC £40,000 cash and service a number of her debts and on-going expenses. Between January 2004 and October 2006, I had paid the PWC £105,000 net. The servicing of those payments had been made through my company. In 2008, the money I had paid away to the PWC was accounted for as a Directors Loan and in July 2009 it crystallised as a dividend.
The Agency saw this as income and therefore included it as part of the income assessment. I argued that I was now effectively being penalized twice; the first by paying the money out of the company in order to service the MoA; and secondly by the Agency now making an earnings assessment that included the dividend which they perceived was personal income.
Annoyingly for me, the accounting of the dividend was simply a book-keeping exercise. I had never physically received a cash dividend of £52,000 as the money had already been spent which is why it was recorded in my director’s loan account. When I couldn’t clear the Director account, the loan had to be declared as a dividend. Adding insult to injury, I was also hit with the tax on the dividend which accounted for much of the £28,000 self-assessment tax that was served on me by HMRC, This also meant that the PWC received her cash tax free meaning I was liable for footing her Inland Revenue bill.
With regard the MoA, the Agency never considered its legal standing and claimed that any settlement agreement that sought to limit child maintenance was nulled. I repeatedly stated that our MoA did not seek to limit child maintenance, but rather to facilitate voluntary contributions as and when they were deemed necessary, such as my funding of my son’s school trip to Paris.
I corresponded with the Agency over the ensuing weeks, but the Agency had already made their mind up and repeated their decision that the calculation and the exclusion of the Minute was correct. I was then told I could appeal their decision either through their internal appeals team or via the Independent Case Examiner (ICE) NB: it should be noted that the information provided by the Agency that I could appeal to ICE in respect of the calculation was procedurally wrong)
As I did not have sight of the calculation breakdown and did not know how it was derived, I felt I was placed in an impossible position to appeal via the Agency. I also had no confidence that the Agency’s appeals team would do anything other than rubber stamp the original calculation as taken by the case worker.
I therefore opted for ICE, believing that the independent Case Examiner would see that it was clearly inequitable to be assessed upon a dividend that came into play as a direct consequence of paying funds over to the PWC. I suspect there will be no surprises as to the ICE’s findings with regard this complaint
Blog 7: In the next blog I will discuss the declining relationship between myself and the Agency and my experiences with the ICE
Taking on Child Support 