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Courts can make their own calculations of absent fathers' earnings
No need to rely on HMRC when assessing maintenance, Ward LJ says
Courts do not have to rely on the records of HMRC when calculating the earnings of absent fathers, appeal judges have ruled.
The case concerned the father of two teenage children, who claimed his earnings as a self-employed handyman amounted to a net weekly income of only £151.37.
The court heard that Trevor Gray had now remarried and had a young child from that marriage.
The first tier tribunal held that he had failed to declare his full income, and made its own finding that Gray had a net annual income of about £18,300.
Delivering judgment in Gray v Secretary of State for Work and Pensions and James [2012] EWCA Civ 1412, Lord Justice Ward said challenging the accuracy of trading accounts was 'obviously not a simple process designed to speed up the assessment of parents' liability for child support.
'It would all be much easier if the decision-maker was obliged to accept HMRC's assessments.'
Ward LJ said the question was whether decision makers were bound by schedule 1 of the Child Support (Maintenance Assessments and Special Cases) Regulations 1992 to accept that the liable parent's gross income was as stated on the information provided by the HMRC.
'I accept that the aspiration of the regulations is, as the explanatory note explained, to reflect the original policy intention so that self-employed earnings for income tax purposes are the same as earnings for child support earnings.
'That is achieved by ensuring that the calculation of earnings is to be in accordance with the Tax Act of 2005.
'But the regulations do not go so far as to state that a father's earnings for income tax purposes shall be treated as his earnings for child support purposes. There is no such deeming provision.'
Ward LJ said he must 'give effect to the ordinary meaning of the words' and conclude that the decision maker is 'entitled to rely on an evaluation of the father's actual profits from self-employment in the relevant period rather than the figures submitted to the HMRC'.
He said the father's original appeal on this point must be dismissed.However he allowed his subsequent appeal on the question of whether the 'notional tax due on the child support figure for earnings or the actual tax paid or payable on the HMRC's assessment' should be deducted.
'If the child support officer is going to increase the profit above the level accepted by the HMRC then his responsibility is to deduct the income tax (and the NIC) which would be payable on that level of profit.'
Lord Justice Ward allowed the appeal and remitted the case to the secretary of state for work and pensions for a recalculation of the child support assessment 'but only so as to allow for a deduction of the income tax and national insurance on the notional surplus between the earnings found by the First Tier Tribunal and the earnings accepted by the HMRC'.
He added: 'For the sake of the children I would ask that this be done just as soon as possible, please.'
Lord Justices Lloyd and Rafferty agreed.
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