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Child Maintenance Variation Application

Coronoavirus and retained profit

Tribunal treatment of retained profit has always been controversial and the coronavirus epidemic is going to add fuel to the flames. If one thing has been proven, it's that businesses need retained profit to see them through events like this. Hopefully, we'll not see another global epidemic but who knows? No one saw this one coming. And who can predict injury, or illness or extreme bad weather. Retained profit has been seen as low-hanging fruit for Tribunals to go after but we are arguing this needs to change.  

What does a Variation cover?

Variations were introduced as an anti-avoidance measure.  Over the years, this legislation has developed in such a way that is is particularly applicable to parents who own their own company. If a paying parent owns their own company, their status is PAYE and the current system does not necessarily take into consideration dividend payments. This can lead to allegations of fraud and deliberate hiding of income. In addition, if there is retained profit or a Director's loan account in operation, it could be seen as an attempt to avoid a maintenance liability, even though best business practice encourages this. Whether intentional or not, the only way to investigate this scenario is by way of a variation application.

Where circumstances exist that a spouse or partner is a shareholder or employee of the paying parent's company, without the proper consideration being given for the shares or salary, an allegation of diversion of income may be made. We strongly recommend you get our advice on how to deal with this situation.

Many parents who have used the last CSA system have relied upon lifestyle variations but under the CMS, this was removed. December 2018 then saw the re-introduction of a variation to look at the paying parent's assets. This includes land and property and will be charged at 8% of its value. Under the new rules,  there are a number of circumstances when an assets variation cannot be added but all these areas are extremely complicated and the best way to navigate to a successful outcome, whether you're a Paying Parent or a Receiving Parent, is to get expert help from an experienced specialist with an understanding of Tribunal procedures.

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