What happens to child maintenance if income is reduced due to furlough, lay-off or redundancy?
In the last month, the COVID-19 (Coronavirus) pandemic has had a devastating effect on many family incomes and, although the first priority must be our health, safety and wellbeing, for most it is a very worrying time with regards to how they will survive and pay day-to-day expenses.
‘In particular, anyone who relies on child maintenance payments will be worried about whether those commitments can be met,’ says family solicitor Linda Pope. ‘And wage earners and the self-employed will be worrying about how much longer they will be able to meet their commitments.’
In the nine days from 25 March around 477,000 new claims were made for Universal Credit, eight times the normal number of daily registrations, indicative of the number of people who have lost their job via redundancy or any source of income if they were self-employed.
Many employees will be facing a drop in income having been laid off or placed on furlough by their employers. While this is a temporary leave of absence, they remain employed and will be paid up to 80% of their pay up to a maximum of £2,500 per month, plus the associated employer NI contributions & minimum automatic enrolment employer pension contributions on that subsidised wage. Employers still remain liable for associated employer NI contributions & and minimum automatic enrolment employer pension contributions on behalf of their furloughed employees.
For those who are self-employed, the government Self Employment Income Support Scheme (SEISS) may provide a taxable direct grant of 80% of their average profit for the three tax years ending with the 2018/19 tax year, or a shorter period (even just the 2018/19 tax year) if three years’ accounts are not available. This is also subject to a maximum payment of £2500 per month. To qualify, the 2018/19 profit or average profit for up to three years ending with 2018/19 must not exceed £50,000. The grant will run for three months and payment (representing a cumulative three months’ rights) is expected in June. Claimants can continue to work and generate profit.
If you have lost your job or seen your income reduced
If you have lost your job or are on a reduced income and will not be able to meet your maintenance obligations, you should speak to your ex-partner to try to reach an agreement to pay a reduced figure in the interim and to clear any arrears at a later date.
If you need to ask for the level of the payments to be reduced, then it is important to act quickly so that you do not build up large arrears, and risk damaging relationships.
Only a court can vary a maintenance order and so if you do reach a new agreement with your ex-partner you should then apply to the court to have it endorsed, otherwise the original order will keep running and could lead to difficulties over arrears.
If your ex-partner is unable to meet their financial commitments
You need to be open to having an honest dialogue with your ex-partner as to what maintenance they can afford to pay in the interim, and also when the arrears would be cleared.
If that does not work, and before taking the matter back to Court for enforcement, you have a duty to mitigate loss. This means that you need to investigate whether you would be entitled to additional help from the Government in the form of benefits such as Working Families and Child Tax Credit, Housing and Council Tax benefits. You might also be eligible to claim Universal Credit.
From 6 April 2020, for 12 months, the standard allowance in Universal Credit and basic element in Working Tax Credit will be increased by £20 a week over and above the planned annual uprating. This will apply to all new and existing Universal Credit claimants and to existing Working Tax Credit claimants.
If you cannot agree a new arrangement
If you cannot reach a new agreement, it may be necessary to apply to the court for a suspension of or variation of the maintenance order while your ex-partner remains out of work or furloughed.
At the moment the Family Courts in many circumstances are delaying financial remedy cases until after 1 May 2020, and even then, there is likely to be a huge backlog.
It would be better to agree a figure on an interim basis, so that the payer is meeting some of their obligation, and the other person is still getting some money, albeit less than they are used to.
How we can help
If you cannot agree a change to payments given or received, you could consider using family mediation or the collaborative process, where we can help you reach an agreement and a pragmatic way forward.
The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.