Child Maintenance - Limited Company.

[OhHelloFromTheOtherSide]

I’m hoping someone can offer advice/experience please re child maintenance.

ExH is a well paid contractor through his ‘Limited Company’ and takes a minimum wage from it as well as dividends. He’s suggested that maintenance payments will be calculated on his ‘very small salary’ and I’m between a rock and a hard place as I understand that CMS would only take into consideration the minimum wage salary?

Anyone been in this position?

Only from his side and I paid based on the calc including dividends (plus a bit as dividends are after corp tax and the cms calc should be on gross). It’s the right thing to do.

cms would only take salary into account, so yes he could use the limited company as a vehicle for both tax avoidance and maintenance avoidance. Immoral in my view but allowed.

How is it tax avoidance? Company taxed on profit before dividend taken and individual taxed on dividend income?????

Not sure if dividend income taken into account re child maintenance

I took my case to two tribunals when my husband set up a limited company whilst working as a contractor. The tribunal asked to see his accounts, questioned some of the ludicrous expenses listed and questioned the role of his new wife as a director.

They took into account the company dividends, his lifestyle and awarded maintenance based on all of that and not his pittance of a 'salary'.

Gather as much evidence as you can re lifestyle (living arrangements, income, cars, holidays, lifestyle) and ask for a mandatory reconsideration. You need to make this request within a certain timescale so if this has passed, submit your new evidence and if the same decision is reached then ask for the mandatory reconsideration.

It's not a quick process, and is very frustrating at times but the end result was worth it. Aside from it benefitting me financially, for me it was the principle of him not getting away with it that kept me going. And seeing the judge and her advisers make mincemeat of him in the courtroom was priceless.

He thought he could lie and cheat his way out of providing for his children. Fighting for them kept me going.

husband sorry, ex-husband!!

The net assets of his limited company are part of the marital assets and you are entitled to a share of those.

Maintenance going forward is based on income but I'm guessing a judge will look through the limited company and judges will probably look through the limited company to determine his real capacity to pay maintenance

Seek legal advice on this sooner rather than later

It's not tax avoidance.

The company pays the appropriate taxes.

I'm going to add a bit more to this. If this is a personal service company then a few things should happen - the company pays corporation tax on the net income of the company and the shareholders income tax on any dividends it pays. The tax advantage historically has been on the differential between the tax rate on dividends and salary but this gap has been narrowed in recent years. You can play around with the years in which you receive income as well to defer tax liabilities

As I said upthread the net assets of such a company are marital assets and part of the financial settlement in a divorce. This doesn't matter whether it a personal service company or a full blown operating business.

Furthermore any good divorce solicitor will be firmly arguing that maintenance should be based on income coming into the company rather than whatever the shareholder (in this case DH) is taking out and I think courts are likely to take that approach. They might even be a bit more punitive if they think someone is playing games to hide income.

Thank you all.

If he continues his threats, I could always suggest that his company’s net assets will be taken into consideration as part of the settlement. Also, my amicable offer of 50% equity of the family home, when I have the DC to rehome may be reconsidered (my solicitor has already said I could potentially get more than 50%)

So sad after 20 years and me wanting g to be amicable that he would question child support,

@OhHelloFromTheOtherSide - I would do more than suggest. Tell him that is what is going to happen and go with what your solicitor advises

I was in a very different situation, we had no assets and he walked away from £25k joint debt (goodness only knows how much he had in his own name).

I paid it off over 3 years. I couldn't afford a solicitor and signed the clean-break financial order he presented me with because I just wanted nothing more to do with his shady dealings.

If you have a solicitor then you need to be asking them, every situation is different.