Child Maintenance Charges
Application to Child Maintenance Service (CMS) will now attract an application fee of £20. Further charges will be applied if the case is then administered by the CMS under the Collect and Pay service. Fees and charges can be avoided if the case is managed through Direct Pay service.
This will be the default method of payment. Receiving Parents can no longer refuse direct payments, unless there is evidence of missed payments. Under Direct Pay conditions, the Paying Parent must maintain payments at the rate calculated at all times. If there is any negotiation over the level of payment parents are strongly encouraged to close the CMS case, and move to a family based arrangement
The main benefit of Direct Pay is the avoidance of maintenance charges. CMS will carry out an initial calculation of maintenance along with an annual review, but no other administration will take place unless payments are missed
Historical non payment may not affect the initial decision to place the account on the Direct Pay service, but the Paying Parent may be subject to an Unlikely to Pay test, during which time s/he will be have to demonstrate compliance and charges will apply during that time
If the Paying Parent defaults on payment, the case can be moved to the Collect and Pay service which will incur charges. Direct Pay options may be offered again after a period of time in which the Paying Parent demonstrates compliance.
For parents who wish to keep their location private will be encouraged to apply for a ‘Non Geographical Bank Account’, or other services such as Paypal.
At the time of writing, we recommend that parents keep a valid record of any Direct Payments made. Ideally this should be in the form of a bank statement, or signed receipt which clearly identifies payments as child maintenance. The key to avoiding charges is…Pay On Time, All of the Time
Collect and Pay:
Paying Parents who fail to make regular payments directly to the Receiving Parent will risk a transfer to the Collect and Pay service, involving collection of maintenance by CMS. Both parents will need to pay fees for the Collect and Pay service, including:
- The Receiving Parent will lose 4% of any maintenance paid
- The Paying Parent will pay an additional 20% of the maintenance calculation. Further charges may be applied if enforcement action is taken.
Example: an application is made on CS3 and a maintenance calculation is made at £40.00pw. If the couple arrange to make/receive the payment directly, the Paying Parent will pay £40 and the Receiving Parent will receive the full £40. If the case is managed under Collect and Pay, the Paying Parent will pay a total sum of £48.00 (£40 + 20%) and the Receiving Parent will receive just £38.40 (£40 – 4%). CMS will gain £9.60 from these charges.
The Paying Parent will be liable for a 20% charge in addition to the maintenance award, which may cause considerable financial hardship to subsequent families. The rate is high to act as an incentive for compliance and to encourage regular payments without default, but there are flaws in the system. Our first concern is what constitutes non compliance? In the existing schemes, NRPs are often tarred as being “non compliant” but in realitiy it is as a result of the Agency’s inept administration. Such concerns were raised during the consultation process, but no definitive answers have been forthcoming, hence we remain skeptical of claims that Paying Parents are not unfairly subjected to charges.
If the Direct Pay arrangement has genuinely broken down, the Receiving Parent must contact CMS as soon as possible and ask for the case to be transferred to the Collect and Pay service. CMS claim that they will contact the Paying Parent within 72 hours to investigate if payment was made. The Paying Parent has 14 days in which to prove that the maintenance was paid on time. Note: this is not a 14 day period in which to pay the maintenance – only to prove that it was paid in accordance with the agreement.
If the Paying Parent cannot demonstrate that payment was made at the correct time, it will be treated as a missed payment and will migrate the case to Collect and Pay with the appropriate charges being applied back to the date of the missed payment. There is no information available as yet to confirm how long a Paying Parent will remain on collect and pay, or how many times a case can move between the two schemes.