Child maintenance and use of HMRC data, continued...

Published on 22 November 2011

LITRG continues to keep an eye on child maintenance changes to the extent that proposals seek to use HMRC data for maintenance assessments. Commenting on draft regulations proposed by the Child Maintenance and Enforcement Commission (CMEC), we stress that clarity is needed as to what happens when HMRC data is considered unreliable.

Earlier this year, we responded to the DWP green paper entitled ‘Strengthening families, promoting parental responsibility: the future of child maintenance’, reiterating unresolved concerns regarding the use of HM Revenue and Customs (HMRC) data in child maintenance calculations.

Change in this area continues, with the Government proposing to abolish CMEC and transfer its functions to the Department for Work and Pensions – a Department which is of course planning to use HMRC’s ‘real time information’ (RTI) data for the purposes of calculating the new Universal Credit. It therefore seems inevitable that such data will similarly be used for child maintenance calculations.

In response to recently-published CMEC draft regulations which seek to make various amendments to child support legislation, we therefore reiterated concerns about the use of HMRC data for child maintenance calculations and how RTI would impact on them in future.

Our response also focused on the tax interactions of two particular proposals.

Firstly, in relation to changes suggested to the definition of foreign earnings, we highlighted that any changes to regulations, especially if they encompass income which is not taxable in the UK, need to be considered carefully in view of the differences in definitions between the child maintenance and tax system. We also urged consideration of wider issues as a result of the introduction of a statutory residence test in the tax system.

Secondly, on proposed changes to allow estimates of income to be used where actual income is unknown or where the available data is considered unreliable, we raised concerns that the substitute data used to estimate income is based on employee earnings rather than self-employment. This could be particularly problematic if the legislation is not clear about when data should be considered unreliable, otherwise there is the potential for a person’s actual earnings to be replaced by an estimate which may not take account of their individual circumstances.

Our full response can be found in the submissions section.

(22-11-2011)

Contact: Victoria Todd (please use form at http://www.litrg.org.uk/ContactUs)