Dealing with the CSA

[hariseldon]

Hi,

I know this topic has come up before on these forums, but I couldn't quite seem to find the threads using search, so thought I might try asking again.

I've always paid an agreed sum between myself and the mother, however she is now beginning to demand outrageous sums (double the previous amount) and it's looking increasingly likely that I'll find myself in a situation where I'll have to deal with the CSA.

Is there any general advice for dealing with the CSA in a contractor - Ltd company scenario?

I'm not quite sure how it works if you work a potentially variable number of hours per week. Is it a case of checking the company accounts from the previous year and working out an average from that?

Is the figure they take the amount you've taken out in wages + dividends? And then if challenged, the full amount earned after tax, vat etc.? What about money that is left in the company accounts?

Sorry to make my first post a series of questions - I'm just a little desperate for knowledge and would be grateful to hear from anyone that has been through this.

Cheers.

[GillsMan]

My understanding is that, by default they will only look at your salary. If your ex puts in a formal request, they can take into account your dividends (but she has to request this). As salary + dividends = personal income, that's all they can check afaik. Daily rate and money in your company accounts isn't any of the CSA's business, since that isn't "your" money, but your Ltd Co's money.

And here's a helpful topic on the subject: http://forums.contractoruk.com/accou...intenance.html

[MaryPoppins]

My understanding is that, by default they will only look at your salary. If your ex puts in a formal request, they can take into account your dividends (but she has to request this). As salary + dividends = personal income, that's all they can check afaik. Daily rate and money in your company accounts isn't any of the CSA's business, since that isn't "your" money, but your Ltd Co's money.

And here's a helpful topic on the subject: http://forums.contractoruk.com/accou...intenance.html

As GM says, they are meant to look at your 'income' as a whole, i.e. dividends and salary.

[Wanderer]

I know this topic has come up before on these forums, but I couldn't quite seem to find the threads using search, so thought I might try asking again.

Unfortunately searching for "CSA" but it won't work because 3 letters is too short/common. As a work around, try googling for site:forums.contractoruk.com CSA and you'll find a few discussions.

Good luck!

[hariseldon]

Thanks for the responses guys. I've a had a read of those threads and not quite sure what to think really - it seems as though it's a bit of a nightmare and no one really has any others.

One question I still do have though - I take a very low salary which is topped up with dividends.

I was thinking of just saying up front that I'd like them to consider dividends and salary perhaps. Is that a good idea or not?

[Wanderer]

I was thinking of just saying up front that I'd like them to consider dividends and salary perhaps. Is that a good idea or not?

Sounds like you are trying to do the right thing but you have to be careful as they may not quite understand what it's like to be self employed. What if you are benched for a while with no income or you take a dramatic drop in income and you are paying out a fixed amount based on a contract you had when the arrangement was made? Make sure they don't just look at the last month's contract fees and figure it out from that because it may not represent your actual income over a full year. You might be best to get some professional advice so that you don't accidentally get yourself into a difficult and inflexible arrangement which doesn't actually benefit any of the parties involved.

Good luck!

[ASB]

Thanks for the responses guys. I've a had a read of those threads and not quite sure what to think really - it seems as though it's a bit of a nightmare and no one really has any others.

One question I still do have though - I take a very low salary which is topped up with dividends.

I was thinking of just saying up front that I'd like them to consider dividends and salary perhaps. Is that a good idea or not?

Guidance has recently been updated. See here, http://www.csa.gov.uk/en/PDF/leaflets/new/CSL303.pdf page 30. But also page 46.

The PWC can also apply for a variation where the NRP has assets excluding house of > 65k. This can sometimes provide a "deemed income" (see P29). There could be an argument that cash in the business is part of your assets (it provides value to what your shares in the business are worth).

From my personal view I would suggest that (assuming you are using the "net" (15/20/25%) scheme rather than the emerging "gross") a relevant income would be:-

+ Net salary
+ Net dividends
+ Net increase in retained funds (i.e. retained profit for year) x your shareholding

The last being effectively the portion of "your" income which you did not receive. The last element of course is somewhat subjective and would depend upon your personal perspective - especially when you consider it may end up being used to pay dividends in lean times.

The point with the last bit is say you were billing 150k per year, paying small salary and 50k dividends thus retaining 100k (gross) which is not finding its way to you is it really right that this should not be included in what you pay child maintenance on?

[GillsMan]

The point with the last bit is say you were billing 150k per year, paying small salary and 50k dividends thus retaining 100k (gross) which is not finding its way to you is it really right that this should not be included in what you pay child maintenance on?

Yes, IMO. Simply because if it's genuinely not finding its way to you, then it's not "your" money, it's your business money. If you put that money back into the business and the business becomes more profitable as a result, surely this would result in drawing higher dividends which, rightly, would be counted by the CSA.

But IMO, if it's company money it's company money, not my personal money. I see your point though tbf.

[jmo21]

The last being effectively the portion of "your" income which you did not receive. The last element of course is somewhat subjective and would depend upon your personal perspective - especially when you consider it may end up being used to pay dividends in lean times.

The point with the last bit is say you were billing 150k per year, paying small salary and 50k dividends thus retaining 100k (gross) which is not finding its way to you is it really right that this should not be included in what you pay child maintenance on?

Is that actually what happens, or is that what you THINK should happen? you say it is subjective, so are you saying you think it should be taken into account? or that the CSA can take it into account should they decide to?

It's not income yet surely.

Once it becomes income, only then should it be taken into account I would have thought.

[MaryPoppins]

Is that actually what happens, or is that what you THINK should happen? you say it is subjective, so are you saying you think it should be taken into account? or that the CSA can take it into account should they decide to?

It's not income yet surely.

Once it becomes income, only then should it be taken into account I would have thought.

Yes, I think that's the case. I understood that year end accounts were reviewed for the CSA to assess what was drawn from the company.

I must admit though, I found it very difficult to nail down what their process actually is with regard to assessing Company Directors.