The non-resident nightmare: how offshore income is taken into account for child support
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?
|
Share this post
|
Get free family law updates
|
Marilyn Stowe’s new book: expert advice on all aspects of divorce, for just 99p!
Divorce & Splitting Up by Marilyn Stowe is the essential how-to book for anyone who is getting divorced or splitting up from a partner. Read more >>
"A must buy that really opens your eyes to what is involved if you are considering or going through a divorce." - Amanda Brown
"This will answer your questions in a way that non-lawyers can understand." - Miss P.
"This really has helped me to see that there is light at the end of the tunnel and I will come out of it a stronger person." - J
Awards
IAML
18 Comments
JamesB on January 4, 2012 at 2:44 pm
So, does this mean he can become a fugitive and not pay now? I don’t see how the CSA could take money by attachment of earnings outside the UK, so it seems to me the argument was on if he would ever be allowed to return or own assets in the UK. That seems to be how strongly he feels here, and I understand and sympathise with his point of view.
Rachel on January 4, 2012 at 9:41 pm
Marilyn, I have just received a court order for child maintenance in AR proceedings.Her father lives and works in Germany 4 days and lives in the UK 3 days every week. He works for a German company with no links in the UK. He has already hinted that it will be difficult to enforce in the UK. Is it correct to say that after 12 months the court will no longer have the jurisdiction to enforce non payment? What is the position re the spousal maintenance order? Happy New Year to you!
Lukey on January 7, 2012 at 3:27 am
I think Mr F’s position is ridiculous, I think the paragraph you reproduced is self-explanatory – the judge has correctly interpreted the position in my view, in fact I don’t think that it can be argued both ways, it seems pretty clear cut to me.
The only quibble I would have is your assumption that the courts will determine things more quickly – in my opinion our court system is horrendously slow – and no I don’t think that is an accident, lawyers (not all lawyers of course
) have mortgages to pay and mouths to feed…
Marilyn Stowe on January 7, 2012 at 1:56 pm
Lukey
Your comments are interesting. I think far more of these cases should be dealt with by the court. For example where a departure direction is sought on the basis the father’s lifestyle is inconsistent with his income. All sorts of charades go on that an experienced judge could swiftly cut through and deal with.
I agree on occasions the court process is cumbersome however it pales into insignificance compared to the case I have highlighted here.
Thanks and best wishes for a very happy new year.
Marilyn
Laura Guillon on January 13, 2012 at 1:31 pm
Dear Rachel
Thank you for contacting the Marilyn Stowe Blog.
From the information you have provided I understand that you have a Consent Order from the Court which Orders child and spousal maintenance.
It may not be clear where the father is habitually resident- Germany or England? This will affect both jurisdiction and enforcement.
In cases where both parents and the child are resident in the UK, a child maintenance element in a consent order remains enforceable as long as no application is made to the CSA. In such cases, after 12 months from the date of the Order either party can apply to the CSA for a calculation of child maintenance according to the formula in the Child Support Act 1991, which will effectively vary the Order and the CSA will have jurisdiction over the child maintenance element. However, if in your case the father is habitually resident in Germany, the CSA has no jurisdiction and the Order will continue. In relation to enforcing the Order for both child and spousal maintenance, if the father is habitually resident in England, There are various ways to enforce here, depending on his assets within this country.
If he is habitually resident in Germany, both spousal and child maintenance orders can be enforced in Germany. On 18 June 2011 a new EC Regulation came into force which you could use to enforce the Order in Germany. This is Council Regulation (EC) No 4/2009 on jurisdiction, applicable law, recognition and enforcement of decisions and cooperation in matters relating to maintenance obligations (‘the Maintenance Regulation’) Chapter 4 of this Regulation deals with recognition and enforcement of maintenance orders between Member States. The procedure is that you apply for a Declaration of Enforceability which is done through REMO. Form REMO 7 is used, and and guidance notes are provided. The guidance notes can be found on the following website: http://www.justice.gov.uk/downloads/guidance/protecting-the-vulnerable/official-solicitor/reciprocal-enforcement-of-maintenance-orders/remo-7-application-form-guidance.pdf and form REMO 7 can be found on this website: http://www.justice.gov.uk/downloads/guidance/protecting-the-vulnerable/official-solicitor/reciprocal-enforcement-of-maintenance-orders/remo-7-application-form.pdf
You will need to contact the Court in which the Order was made and ask for a certified copy of the Order. You will need to provide the parties’ names, the approximate date of the proceedings, the nature of the proceedings and the country in which application for enforecemnt is to be made. This information will be needed to complete Form REMO 7 which will then need to be sent to the Reciprocal Enforcement of Maintenance Unit with a certified copy of the Order. REMO central authority will complete the rest and transmit it to the central authority of Germany for enforcement.
Once sent to Germany the Order must be declared enforceable within 30 days and then the Order can be enforced there.
If we can be of any further assistance please contact us on 01423 532 600 and we can direct your query to one of our solicitors.
Best wishes
Laura Guillon
For and on Behalf of Stowe Family Law LLP
Rachel on January 16, 2012 at 10:13 pm
Laura,
Thank you so much for your reply.
The information is very useful and it is looking likely that I will have to implement it in the near future. The court order was made by a district judge at a final hearing in ancillary relief proceedings. It seems I would need to clarify exactly which country he is habitually resident in as he owns property in both the UK and Germany and spends equal time in both.
Once again, thank you for the help and guidance, it is very much appreciated. Rachel.
Tim Kenny on January 17, 2012 at 12:37 pm
The bit that really aggrieves me with these cases is that it is all about the non-resident parent. When calculations are made the income of the resident parent is not taken into account. IN a lot of cases I have read and am going through currently it is the resident parent that is only looking for how much cash they can get. I have always paid my CM to both my children’s Mum’s and feel very strongly that this is my responsibility a contribution, not an overriding cash cow. We all understand how much it costs to have children, but when the law respect will and treat both parents as equal not just from a Parental Responsibility point of view but also monetary. The law is very bias and until the equality of parenting is taken into account we will be arguing for years. From my point of view it should be about how much does is cost to bring up children NOT how much does the father earn and 15% goes to the resident parent. The discounts of having your children overnight do not in any way reflect the costs that one has to bear. The whole thing is wrong and we need to sort it, it’s about the children at the end of the day not the dispute of the parents!!
jane on January 24, 2012 at 12:15 pm
If a father owns a company that pays his income from Isle of Man at 18% tax but he lives in England how does this affect his child support liability?
Maz on March 14, 2012 at 10:16 pm
Marilyn, I read your case notes regarding Mr F with interest.
My partner has 2 children from his marriage. In the first 4 years after they split up he voluntary paid 25% of his income to his ex wife as maintenance for the children. When he retired from his job in the RAF after 22 years his / our income was greatly reduced and have both only been able to find minimum wage part time jobs. However, with his pension the CSA have dictated the level of payments to be made at 20%. Leaving us living on the bread line and him unable to afford to visit the children as often as he would like as it incurs a 250 mile round trip for a visit or 500 if he brings them to stay at our home. His ex wife refuses to help with the journey in any way.
He has now been offered work in Afghanistan on a 12 month contract giving us an annual tax free salary of £43,000. He is happy to continue paying the maintenance, however, if he HAS to pay 20% of this salary it would not be worth it for us to live apart and disrupt our lives for what is left.
I have my own house, mortgaged and the intention is for him to earn enough to pay off (most of) it off so we can afford to live on the sort of jobs available to us.
Question – if he is working from a none UK firm in Afghanistan and voluntary paying maintenance at present figure (20% of pension and £140 weekly income) would she be able to ask / insist on more?
Marilyn Stowe on March 14, 2012 at 10:35 pm
Maz
I don’t give replies to CSA queries which are case specific on the blog as I only deal with general issues. However this website http://www.cmoptions.org/ may be able to assist you.
Best wishes
Marilyn
Stuart on March 21, 2012 at 4:34 pm
Dear Marilyn,
Just wondered what your take was on the following:
*Final hearing both parties equally split matrimonial pot.
*CSA assess NRP and maintenace amount struck.
*PWC waits the 12 months then applies for a variation on assets of NRP.
*NRP is assessed on the same pot as PWC but now has to pay 8% of assets on top of the 20% of nett income.
*PWC earns double NRP nett salary.
*NRP has mortgage, PWC has no debt.
*NRP now has to find £21K per annum from his assets.
*When 2 children have finished education potentially NRP will have paid over to PWC 56% of the matrimonial pot he received.
Just and equitable?
Sincerely
Stuart
Sam Edwards on May 3, 2012 at 11:00 pm
Can the law brought in 18 June 2011 be applied to recover Child Support arrears if the parent owing is living in an EU country?
Liz on June 21, 2012 at 5:45 pm
Hi my sister is having problems she is disabled has 2 children her ex husband stopped paying for the kids before Xmas last yr saying now that he is working offshore in south Africa he will no long be paying any thing for the girls he comes home to Aberdeen visits his girl friend take her on holiday does not see the girls she has also been told by the CSa that they can not do anything this is all making her I’ll and with 2 teenage daughters that have been spoilt and used to having all the time are making my sisters life hell. If he lives in this country but does work outside the eu he should be made to pay for his kids he too earns over £50 grand a yr what can she do to get him to pay up for his daughters I’m so worried about her it’s all affecting us all . I have been on my own with 3 kids for 14 yrs and never had a penny from their father things need to change in the law.
Observer on June 22, 2012 at 9:38 am
Some good points are raised by our resident male NRPs here. Pity that they are not really being taken seriously.
As Tim says, this is always about the RP as victim; nobody has ever talked of the nightmare faced daily by NRPs.
John on June 28, 2012 at 8:04 pm
Women believe that they are the owner of children and fathers’ money. They are not, the science has prooven that man who creates life and create of the child. Is it?
The whole system is too much oriented towards money and in women favour. CSA has to present the case as follows:
1. Who is refusing to be the resident parent?
(CAFCASS agency is not neutral).
2. Both parents’ income have to be deducted at source related to children needs and the resident parent has to provide receipts and evident of expenses done for the children. Any failure will have the child maintenance deducted.
3. Payment of mortgage is not an expenses it is a repayment of debts towards a wealth purchased. Well only direct expenses such as Daily estimated meal cost, school dinner, club, school fees, education cost, clothing and pocket money for the child should only be accounted.
This is not a rocket science.
linda on December 6, 2012 at 11:58 pm
Hi i am in the same position, my ex partner left the forces then started working over seas in afghan/iraq doing close protection. My assessment is nil as he has deemed himself as not liable for uk tax working out of the country months at a time but is resident in the uk whenever he is not working. Is there anything i can do about this? thanks.
PC on December 17, 2012 at 10:46 pm
I found your article very interesting. I am a US resident and have two children who were both born in the US. I was married in the UK to my spouse who has both a UK and S. African residency and currently holds both passports. We separated in 06 whilst living in S. Africa. He fled to UK in 07 leaving my children and I homeless and without income. I have since returned to the US and have a bifurcation/dissolution of marriage and full sole custody of my children with a court order of child support and alimony in place accruing at 10% per annum. The order was in place in 09 and has since not paid the back child support/alimony. He is now spending most of his time in the UK and has an offshore bank account. His lifestyle is in the millions per year. I am in the process of getting my case opened on a Federal/State level before proceeding internationally. It’s a step by step basis. I do know the US and UK work in union on these such cases. Although my concern is with his lifestyle being fund to the UK from an offshore account, I am not sure or confident what laws and regulations are in place for someone in America and ex spouse residing in UK with Barclays offshore account in French territory.
Mick on April 8, 2013 at 3:03 pm
Unfortunately, many women lie about the amount of time the fathers spend with their chikdren in order to bump up payments. The CSA take the womans word as gospel and are heavily biased. I pay the right amount as calculated by the CSA website for the nights I actually have them and she has lied to them saying I have them for 70 nights a year when in fact I have them for 160; more than 40% of the year. She wants the extra money to fund her two cars and ipads etc etc.
My company is registered in Jeresy so unless she starts telling the truth she can sing for her payments. I’ll go all the way to court and then move out of the EU if needs be.