Can the CMA make my self-employed ExH pay according to what he earns and not what he draws as a salary/dividends?

[Namechanger2015]

I've just applied for CMA, and have been told that my self employed ExH (he works under a limited company) will only have to pay according to how much salary and dividends he draws from his company and not according to his actual income.

He invoices approx 70-80k per annum. This money goes straight into his business account. He then withdraws 9k salary and approx 20-30k as dividends.

The CMS calculator suggests I am entitled to around £950/month if his salary is 70k, but just £400/month if his salary plus dividends is 30k/month.

This is obviously a massive drop, but the lady from CMA said there is nothing they can do. It seems like a ludicrous loophole to me?

I am going through a divorce and Form E is due to be exchanged tomorrow. CMA will take another 4-5weeks to process before it comes into action.

Can I do anything about forcing payment based on his full income?

I am actually devastated at this potential shortfall in income, ExH does not provide for DC at all, sees them once every 6 weeks, and has had 5 solicitors letters requesting he pay CM, all of which he has ignored.

[redhat]

foragogo I simply meant that with the changes to taxation on dividends the advantages of operating a one person limited company have all but disappeared.

The reality is that the OP's ex is working for one business and so it may be that since there is limited advantage to acting via a limited company and since there is risk that HMRC deem hims an employee (and that risk is there for the client as well as for himself), that arrangement is changed by the ex and his client to reflect the reality of the situation i.e. he becomes an employee.

[foragogo]

Hi redhat yeah I know what you meant about that, I mean what alternatives are you saying there are for one person contractor companies?

[redhat]

self employed or limited company generally. Advantages and disadvantages to each. You can claim far more by way of expenses etc if you're self employed but theres even more chance HMRC will look closely.

[foragogo]

Do you mean sole trader by self employed? As opposed to being an employee of your limited company?

[redhat]

If you're an employee of a limited company you're not self employed. You and the company are different things.
(I have no magic solution btw)

[Bailey101]

You'll also have to bear in mind that if someone else has 50% shares in the company, then you're ex will only be able to legally take half of the amount that is available for dividends. So, if after the company paid salaries, tax, expenses etc, there is £50k available for the dividends then ex can take £25k and the other shareholder can also take £25k.

[Collaborate]

Although if the friend actually doesn't do any work in the company it's simply a fix, which as bb says upthread a CMS tribunal will be able to see through.

[Bailey101]

If you're a shareholder, you don't have to do any actual work - it means you've invested capital into the business. It's only if you take a salary, as opposed to dividends, then you should be doing work for the company.

[Collaborate]

To gift a share in a company to, say, a new partner might entitle that new partner to a dividend in law. However the gifting of that shareholding will be seen by a tribunal as deliberate deprivation of income. He presumably is a contractor selling his services, so the company will be a vehicle by which he seeks employment. He can at any time resign from the company and set up a new one.

[Namechanger2015]

Thank you for your messages all. I am clearly very naive when it comes to tax and finances, that much is clear!

I received ExH financial disclosures today and he has taken £155,000 from our joint business account and loaned it to his friend, and has added his work colleague as a shareholder and has been paying him £5,000 per month loan too.

(I am 50% shareholder but he was financially abusive and did not let me access my earnings from this account).

He has also emptying out his ISAs from £35,000 to £715 to pay his brother back for an inspecified loan, given his brother £135,00 from the sale of his flat, and cleared out £155,00 from his own saving account to just £0.84. Oh, and borrowed from his family to loan his friend £838,000. And falsified a document to say this was an agreed loan from me and H to his friend. Why, I don't know.

I do have a v good solicitor and forensic accountants on board which I will need. But I guess I was trying to get my head around my finances myself and be in a better position to make informed judgements about things.

But actually it's all got much more complicated.

[Bailey101]

Wow. What a fucking dick!

I'm not normally one to jump on the 'bleed em dry' bandwagon, but he deserves to lose every penny for behaving like that. I hope your solicitor slaps him down a peg and you get every single thing you're entitled to.

[Collaborate]

Behaviour such as that will only serve to get him on the wrong side of the judge. It will be clear that he is trying to frustrate your claims by improper means, so will help you.

[Namechanger2015]

Collaborate I hope so. I am terrified we will lose everything, I am just waiting for my solicitor to call me back.

What is unbelievable to me is that we have an 8, 6 and 3 year old who will be losing out financially in a massive way because of this.

I really, really hope judges are humans who see through the bullshit and it's not all black and white and just down to final numbers in a pot. He has been screwing me out of my own earnings for years, and now disposing of all else.

He currently lives in our family house (4-bed detached) whilst me and DDs share one bedroom at my mums house. On his disclosures he states that he wants to keep the house to live in, he has had it valued at around 100k less than the neighbours house sold it for.

It's a real mess, and I'll be paying through the nose for solicitors and forensic accountants to sort out his lies.

[Namechanger2015]

Argh. So the CMA have come back to me and said as ExH earns £9,000/year, I'll be getting £128.00 per month for my three children. He sees them once every two months, and he drives an Aston Martin.

I have his tax return for 2013/14 (on which this calculation is made) and he has withdrawn £28,000 in dividends plus additional £20,000 of rental income.

I told the case worker this and she said its not what the HMRC said, and if I appeal the decision I need to provide hard proof. It's on his tax return!

I'm not sure what other proof I can reasonably provide, and as I have since left him I won't have access to any of his paperwork moving forwards. How on earth do I make this work?

[SwearySwearyQuiteContrary]

You know, sadly I've seen too many threads on MN to be surprised at the cuntish behaviour of so many fathers towards their former partner and children (although I would love to know how they rationalise away what is, in all but name, child neglect). What never ceases to amaze me are the people that enable them. What kind of wanker goes along with deliberately depriving children of a decent standard of living? What kind of person thinks that colluding to deny someone a reasonable and fair settlement is "helping a mate avoid yet another grasping bitch?" I find it utterly unfathomable.
The very wise posters on the relationships board might be able to point you in the direction of a decent forensic accountant and legal team that specialise in this kind of thing. I'd really recommend posting there for advice.

[Namechanger2015]

Thank you babybarrister, I was under the impression that family courts would not look at / be interested in what's going on regarding CMS and would just accept that he is paying something, so would say that's fine. I don't have any prior experience of courts and judges and I guess I am panicking about how deeply they will look into things or just take his word for it. I know it's irrational.

He did promise my solicitor (verbally and email) that he would hold onto proceedings of flat sale until financial proceedings were complete, and then went and gave all of the money (£135,000) to his brother to pay back an unspecified loan. He has also mysteriously borrowed/lent £835,000 to his best friend so claims to be selling all assets in order to finance this loan to his friend. It makes no sense at all.

The people colluding and enabling him are his dad (my ExFIL, who promised to protect me for ExH's violence), his best friend (whose children are like family to my children), and his business partner (who we met at you 20 years ago and I considered to be a good friend). I guess money talks and shows people for who they really are.

[Namechanger2015]

That's there kind of game I was expecting he would be playing - something far more subtle and cleverer than he is currently doing.

At the moment I'm pinning my hopes on the court seeing his spending as reckless and setting transactions aside, etc, but who knows here this will go. As far as I can see I'll end up with a good amount for us to live off, or nothing at all.

My confidence is shaken from years of listening to how bad I am with money and being told 'don't mess with me, you don't know who you are messing with and I will always win'

I've been through his Form E and have solicitor and forensics doing the same at the moment. I'm keeping everything crossed. He is putting lots of emphasis on assets being acquired prior to marriage etc and seems to think he can keep hold of everything at the moment. I can help but worry but need to have faith this will work out.

[Namechanger2015]

CMS is really the least of your problems I am afraid ,,,,, cash is king and you want to be going after the capital

Your comment above kept me up last night, I couldn't stop thinking about it. I am hoping the courts can look at overturning payments made to his family and friends, as it's clear his pattern of spending was very reckless and deliberately done simply to hide and dissipate his assets. Is this a common outcome or should I genuinely need to assume this money is now gone? I appreciate it's difficult for you to comment without knowing all of the details.

I know I am panicking, I am trying to stop, and I am looking to re-start some counselling to stop me falling apart. This morning he text regarding children's access - a whole other thread - so the panic is ongoing and I can't live like this.

[Traveller123]

To BabyBarrister. Based on your comments above sounds like I received spot on advice from Solicitor/Barrister. Asset split favoured ex as they were the weaker earner. Child Maintenance was a guessed figure of £750/month based on assumed income as my Ltd Company had only been trading for a few months. Spousal Maintenance set at £400/month for 4 years on logic that when son is 14 years old ex can work full time and be less dependant upon myself. Consent Order was worded in such way that it represented full and final satisfaction to both Parties and neither could make any further claims for; Capital, Assets or Income.

Consent Order has been in place for almost a year now and I will soon see first set of accounts submitted to HMRC. Grey area for Self Employed seems to be what figures are used for Calculating Child Maintenance. Some say its Gross Taxable Profits. Some say it is Profit after Tax as that is maximum Director can pay themselves. Some say it is Salary plus whatever Dividends Director has received, if any. Some say it if Director does not take a Dividend it will be salary only which is usually around the Personal Tax Allowance Threshold.

Comments welcome as I hope to make a private arrangement and avoid CMS costs if I can point to some recognized legislation/case law to help ex understand. However, if they do understand they will want to go through the courts if Child Maintenance is reduced once actual trading figures are known!

[RedHelenB]

Traveller why don't you want to pay for your children? I give my kids everything would nt occur to me to try to wriggle out of it, even if it meant beans on toast forever. You are talking about 4 years.

[Traveller123]

Happy to pay as long as correct amount. Child benefit, child tax credits and child maintenance total £1,100 per month. Not convinced it costs that amount to raise a child comfortably. Child maintenance should cover what child needs. It is not meant to be a retirement pension for mothers.