Angry about CM

[PeriPipkin82]

My ex & I separated 13 months ago, we weren’t married & have 1 child together. I have asked him to sort maintenance privately which he was fine with & paid £300 a month however it was sporadic so I thought it best to go through official lines so CMS..he is a Director of a a Ltd company & draws down no dividends, wages or shares so now DWP have told me that he can pay zero. I asked DWP to check his Ltd company as he earns a lot of money but because there is no individual tax payment they cannot pursue it as a Ltd company is an individual tax entity so cannot do anything about it. I explained this to him & he said oh well maybe you should have been happy before..can I do anything?

I used to have a limited company. Literally just me doing consultancy, so no business expenses…just income. The only way to take the money out was to pay myself a salary or dividends. You can’t just spend company profit on food and mortgage payments…you have to draw it down.

You aren’t listening.

No this is not ok. Taking money out “after profit” is called paying a dividend. Which then needs to be declared on his personal tax return and tax paid on that.

One of two things here.

1. HMRC are lying to you

1. You have misunderstood what they told you.

The profit belongs to the company, not him. He can't just spend it.

If he takes the money from the company then it must be recorded as salary or dividends.

Again, correct.

OP you have got zero grasp of how this works, where are you getting your information from?

*after Profit after tax

Ok so once tax is paid/expenses are paid the profit on a business is not yours?

It’s been a few years since I studied accountancy but you can’t just spend the profits, he’s a tax evading child maintenance avoiding cheesy scrotum!

Cheesy scrotum!! Brilliant

The profit belongs to the limited company which is a separate legal entity to directors and shareholders

Say oh not to worry lets go to 50/50 with the kids then

No it isn't! The profit is the company's, not his. When is becomes his, there is personal tax due on it. He has to pay the personal tax, either on dividend, salary or a combination, before he can spend a penny on the electricity or gas wherever he's living. He can't spend the company's profits on those. Listen to the accountant on the thread (not me, but I pay my accountant a pretty penny to sort my taxes out properly!).

No it isn’t. The profit belongs to the business, which is a legal entity in its own right. It can then be distributed to the owners of the business, the shareholders, through making a dividend payment. The shareholder of the business, then need to declare these dividends on their individual tax returns.

Basically I’m guessing he earns a lot of his money in cash. As I do as a director of a Ltd company.

Now legally this is all to be recorded however I’m guessing he keeps a certain amount to his pocket and everything else goes in the company and thus he isn’t taking a wage. But being all “above board” as far as hmrc are concerned as his paying tax etc.

The fact he has a live in gf means he could claim she pays for everything while he runs a hobby company or is building it up still so while he takes no wage op gets no cms.

Or he could even be paying the gf a wage from the company while taking nothing himself at one point in the future again so his cms would be zero.

That would be my worst nightmare

Not saying I get paid what I mean is the companies income is all cash so I could just not declare some.

He must get a lot of cash payments, either that or all of his monthly personal spending is done through expenses.

My limited company doesn't deal with cash payments at all, the profits after wages, expenses and dividends belong to the business, not me. They are just sitting there while I figure out what to do with them, I'm definitely not allowed to just withdraw it with no consequences through HMRC!

What letting their dad actually do something useful?

No.

He's either drawing a salary, which would be one of the expenses of the business.

Or paying himself a dividend from current or prior profits (think of this like a lump of salary all in one go and just as liable for CMS as a salary)

There is a third option of a directors loan account, where he just takes money, but creates a debt in the companies books and has to pay it back. If he doesn't there are massive tax penalties. Most people run up a loan account during the year, then issue a dividend to clear the balance at the year end (see above for dividends)

Essentially, there is zero way he is taking money, for free, that would not be counted by CMS as income.

He's on dodgy ground paying an unrelated person he's not married to/in a civil partnership with a salary from the company unless she is working properly for the company. (Artic Systems case.)

Ok, whatever the legalities are..he doesn’t earn any money himself regardless of the circumstances so what do I do. I have to do something & HMRC don’t want to know nor do DWP

I had similar happen to me. Went from £70 a week to £7 as ex set up a limited company to reduce her salary to the minimum to avoid paying CM. Was pretty sickening to know she did this and not wish to support her daughter.

CMS do have a financial investigation unit. You have just got to keep following their processes to get to this stage. Its whether you have the will power and energy to fight this and takes time. I gave up but i can just about manage on my salary.

Thank you, thats really helpful so literally nothing I can do? Frustrating..not helpful people telling me that he’s breaking law etc..I just want maintenance for our child I don’t care about the rest

What you need to do OP, is ask for a variation.

This is where someone is diverting or not declaring income.

What does he do? For example if he's an electrician, the LTD company is an electrical services company, but he's employed his girlfriend (who holds zero electrical qualifications and clearly isn't the one performing the work) then CMS will just laugh at him and include the whole amount he's "paying" her as his assessable amount.

Dividends, you need to ask them to do a variation for them to take into account. This was supposed to have been updated so you didn't have to ask them anymore, but they are quite useless so you'll probably need too.

You can also declare that his lifestyle doesn't match the lack of income he's declaring. Eg. Earns no money but drives a new car and he's on his second holiday this year. They don't believe the "it's my girlfriend's" any more than you do. Also, I think any assets he holds can be taken into account.

You can get your claim investigated by the CM financial investigation unit. I think you need to request a mandatory reconsideration and then it can be referred to the unit.

I would speak to a competent CM advisor on the helpline to discuss your options. Be prepared to wait in the queue. When you get through check whether you have come through to their triage unit or it has gone to a CM advisor. They can put a flag on so when you phone through it will go to the advisors direct.