ExH with own business paying all salary to his wife - is that legal

[writingsonthewall]

I'm guessing it is but thought I'd check. My exh has his own business and I have just been told I will no longer be getting any child maintenance from him as his salary is £58 per week, meaning he has to only pay £7 a week. He's been paying £380pcm for 9 months while his salary has been this level (go figure!) and so the overpayments mean he doesn't have to pay me anything for over 2 years.

I guess that the way that he has massaged his income to this level is to pay all the salary to his wife so that he can avoid CMS payments. Is this allowed / legal? I guess it is, and hence nothing I can do?

thanks

Are you sure it's salary he's paying her? In most limited companies, most of the money is distributed as dividends. So it's possible that she owns all the shares in the limited company and so receives all of the dividends. Did he own the company before he married her? If it is a limited company you may be able to find some of this out from Companies House.

I have no idea to be honest, I guess it may be dividends (or actually maybe he's just paying himself dividends if they aren't taken into account for the CMS calcs?).

He did own the company before he married her yes, I'll do some digging on companies house - thank you

This is surely tax evasion?? If he is on zero salary, he won't be paying tax either?

Could you seek some legal advice? If it is tax evasion/fraud, I would be tempted to contact him and say you're aware he's committing fraud and will report as such.

I'm not sure it is tax evasion if she's paying the tax instead. It's all very depressing.

But he is paying himself nothing so he isn't paying tax- is he claiming benefits?? Is he registering himself as not earning??

It sounds dodgy. Sounds dodgy as hell!

Tax evasion?. Minimising tax liability is perfectly legal.

It would be sensible for any salary paid in a Ltd company to be below the tax threshold and pay dividends annually.

OP I don't know how the CMS calculate but if it's based on taxable income what your exH is doing may be legitimate though immoral.

I think it's on taxable income yeah so as suspected immoral but not illegal. shame.

thank you all

If he is diverting his income to his wife you need to apply to the CMS for a variation. If they agree that he is diverting income in order to reduce maintenance payments they can take it into account for child maintenance purposes.

Similarly if he has reduced his salary and is paying himself dividends instead, you can apply for a variation to take his unearned income (i.e. the dividends) into account.

Thanks prh4 - I've just been googling and came to the same conclusion which gives me some hope (hopefully not false hope).

I've just spoken to them again and they can't tell me what information he has submitted that gives his new income as £58 per week but they are going to raise a mandatory reconsideration. It's a start I suppose.

I hope you get somewhere. It is revolting that a parent could do this.

I got a successful CMS Variation, stick with it!

It's tax evasion unless he can prove that his wife is actively involved in the business.

I work for a family business. Myself, my parents & my brother earn £750 per month & the rest is paid in dividends. But although we didn't legally pay tax on the dividends the amount has to be entered on our self assessment & counts as income.

HMRC brought in rules to try & prevent this sort of thing. They are not foolproof but they will look at the circumstances & whether both directors for example are paid a similar amount.

You need to go on companieshouse.gov.uk which is free of charge and look up the limited company and see who owns the shares for a start and also download its accounts.

Also did you have a court sealed financial consent order on the divorce which sets out any spousal maintenance or a clean break and also sets out what is paid for the children and how his shares in the company are divided between you and him (if indeed he had the company then and it was one of the assets).

No advice, but what a prick.

Oh yes midnite!

Thanks for all the other advice, they're currently doing a mandatory reconsideration and if (when) that comes to nothing I'll apply for a variation.

I'm going to keep fighting however draining it is.

I've looked on comp house and can't find his business so think he must be a sole trader so not paying himself dividends. I think actually what's happened is he left his paye role in Apr 2016 and all they've got is his tax returning ending Apr 2016 which is effectively useless as he's had a change in circumstances since then. It's how they go about deciding what his future earnings will be that is at fault.