Question to the Department for Work and Pensions:

To ask the Secretary of State for Work and Pensions, what assessment his Department has made of whether company directors are able to disguise personal income as business revenue to reduce child support obligations under the Child Maintenance Service 2012 Scheme.

Where a paying parent is the Director of their limited liability company, they are legally an employee of that company for child maintenance purposes. They are also legally required to provide details of unearned income such as dividends in their Self-Assessment Tax Return.

Real time income information direct from HM Revenue and Customs (HMRC) is key to the child maintenance calculation which also includes a wide range of income types, including income from property, savings and investments (including dividends) and other miscellaneous income. This makes it difficult for most parents to misstate their income.

People working in certain positions can influence how they are paid and the amount of pay they get. These people are known as ‘complex earners’ and include company directors who can affect their level of pay or dividends they receive.

Where it is reported there is additional unearned income that has not been captured in the maintenance calculation either parent can apply to the Child Maintenance Service (CMS) for an ‘additional income variation.’

The CMS has robust processes in place to investigate any misrepresentation of income and where there is credible information that fraud has been committed, or incorrect income declared the case is referred to the Financial Investigation Unit (FIU). This specialist team request and validate information from financial institutions (such as banks, investment and mortgage companies) to check the accuracy of the information used in the maintenance calculation to ensure financial correctness and can make assessment changes if they discover undeclared income that is effectively being used as income.