The non-resident nightmare: how offshore income is taken into account for child support
January 3, 2012 41 comments
I don’t often cover child support on this blog and I know it is a subject that arouses strong emotions. In the cases I do come across the outcomes are far from what a well-grounded family lawyer would regard as realistic or certain.
But there are some cases that it would be simply wrong to ignore and which provide examples of how a determined father can string out a case for years, while the hapless mother is unable to apply to court and circumvent a circus of litigation that takes place at the public expense.
Cases involving non-resident parents are often particularly messy and complicated. And the Child Support Agency (CSA) has accumulated £3.8 billion in arrears by non-resident parents during its 18-year lifespan.
The case of GF v CMEC (2011) UKUT 371 (AAC), published last month, is yet another example of an inefficient and cumbersome draftsmanship at work. It centres on an argument as to whether an English father should pay his English child maintenance if he is working abroad. You might think the obvious answer is “yes”. After all, what difference does it make where he earns his money?
In court that fact would not be a bar. In “the other world” of the Child Maintenance Enforcement Commission (CMEC), it is. You cannot apply to the Child Support Agency (CSA) for a child maintenance arrangement unless “the parent without the main day-to-day care lives in the UK, or works in the civil service, the armed forces or for a UK-based company.”
However, following this decision things aren’t quite so straightforward – although we don’t yet know whether the argument will stop here. And whatever may still happen with this case, bear in mind one point: we are not told whether the father has yet paid any child support to his daughter throughout this laborious process.
The specifics are worth a closer look because they outline just how complex and longwinded this case has been.
Ms K is the mother of one child, Lauren, who is now aged 14. In October 2007, over four years ago, Ms K first made an application for Lauren’s child support.
Five-months later, in March 2008, a decision was made that her father Mr F should pay child support for Lauren at £55.36 per week.
But by then Mr F had started work in Afghanistan. His job had begun on 23rd January 2008 and he was now being paid an increased income of some £45k per annum, tax free, by a company based in Jersey. So the amount of his CSA liability from January 2008 was some £130 per week.
Mr F did not agree to pay £55 per week for his daughter. He appealed the decision of March 2008, arguing he was now based outside the jurisdiction of Child Maintenance and Enforcement Commission (CMEC) because earnings outside Great Britain for a non UK-based company are not covered.
His appeal was decided 19 months later, in October 2009, when the tribunal found there had been a change of circumstances when he had taken a job abroad. The tribunal directed the CSA to obtain appropriate evidence of earnings and family circumstances and conduct a re-assessment.
On 19th January 2010, two years after he changed his job, a decision was made that during that period the amount of child support maintenance should be reduced to nil because “Mr F was employed by a company based in Jersey Channel Islands and the company’s payroll was non-UK based and therefore out of the jurisdiction of the Agency”.
Imagine how Ms K must have felt when she received that decision? The father was earning a tax free income of £45k per annum, and didn’t have to pay a single penny to his daughter.
Ms K appealed on 1st February 2010. Then on 19th April 2010, she also applied for a “departure direction” on the grounds that the father enjoyed a lifestyle that was inconsistent with his declared income. Such a direction can be made when the Secretary of State is satisfied that the current assessment is based on a level of income substantially lower than the level required to support the overall lifestyle of the non-resident parent. Her application for a departure direction was refused on 10 May 2010. Undeterred, she also appealed this decision.
On 19th October 2010, eight months after she first appealed, the initial appeal was allowed on the basis that the income earned in Afghanistan should be taken into account. The case was remitted to recalculate the amount of child support payable. Calculated at 15 per cent, the weekly maintenance payment was around £130 a week – equating to £6760 each year. What you might think is hardly a huge sum with which to look after a teenager.
The second appeal to request a departure direction was refused because when Mr F’s earnings were taken into account, the cost of his lifestyle was not greater than could be funded by the income and therefore the measure was considered unnecessary.
Mr F was aggrieved. He still believed his earnings outside England and Wales were not subject to CMEC jurisdiction. He appealed both decisions and his appeal finally came before a Judge of the Upper Tribunal on 30th August 2011 – just under four years since Ms K first applied for child support. The decision has just been published.
The Judge dismissed the first appeal. His reasoning however was different to the Tribunal, so he simply substantiated his own judgement for theirs. He found that the income was indeed not earned in Great Britain, and therefore the income earned in Afghanistan is not “earnings” that should be taken into account. However, he could still take it into account as “other income” under the Regulations. He stated:
I do not accept the argument on behalf of Mr F that amounts which fall within the ordinary meaning of “earnings”, but are not within Part I of Schedule 1, cannot be “other income” falling within Part III. I think that the better construction, looking at reg. 7 of the MASC Regulations, and Parts I and III of the Schedule, as a whole, is that items which fall wholly outside Part I, by reason of the way in which “earnings” are defined, are capable of falling within para. 15 unless expressly excluded from it. The key provision is really reg. 7 of the MASC Regulations. The argument on behalf of Mr F has to be that reg. 7(1)(c), in referring to “other income”, is not intending to include amounts which are in the nature of “earnings”, dealt with by reg. 7(1)(a). However, that argument in my judgment fails by reason of the fact that by reg. 1(2) “earnings” (including therefore the use of that expression in reg. 7(1)(a)) “has the meaning assigned to it by paragraph 1, 2A or 3, as the case may be, of Schedule 1”. If, therefore, something does not fall within para. 1 (e.g. because it is from an employment abroad) it is not “earnings” for the purposes of any of the provisions of the MASC Regulations, and there is therefore no reason why it cannot fall within para. 15, unless expressly excluded.
I make no apology for including this paragraph in its entirety. I expect that 99 per cent of my readers will find it virtually incomprehensible. I also think the decision is arguable both ways. I think CMEC and then the Judge have done their best to find a way of including “income not earned in Great Britain” into the calculation despite it actually being exempt as both income not earned in Great Britain or for a UK-based company.
Should mothers seeking child support have to rely on such bizarre tautology to obtain maintenance for their children? Should fathers who clearly do earn income be able to get away with it, by earning the money and being paid tax free offshore or as in other cases, being paid through other devices to reduce their income and have to rely on departure directions? And should they then have to wait years for it all to be rectified albeit with little chance of all the monies due ever likely then to be paid?
I have no idea if at any time during the last four years the mother has ever received a single penny for the child and whether the father may even now be appealing the latest decision –still avoiding what you or I may regard as his overriding duties to his child.
So I can only wonder when a good dose of common sense – in view of burgeoning costs, poor performance and over complicated draftsmanship – will ultimately restore the issue of child support to the courts.
Yes this is a difficult case, but it is by no means unusual. More people are now working abroad than ever before and I would suggest that only the courts have the power deal with these cases swiftly and definitively.
How long would the mother have waited for a successful outcome in court? It would likely be a few months, rather than years. And once the decision was made, even if enforcement needed to be followed up in Jersey, my guess is that it would all have been in place within a year. And furthermore, the mother’s legal costs would have been paid by a father who refused to obey the requirements of the law. Can anyone argue that would not have been a better outcome for all involved?
January 3, 2012