Is this true re Child Support Agency and service companies
I have been told by a divorcing dad that CSA ignore his dividend income when computing his income for child support maintenace. This seems bizarre to say the least. He has been running a successful business (not anywhere close to IR35 related contracting work) through a limited company for around 10 years.
Like most other sole shareholder companies he draws a minimal salary and votes himself the balance by way of dividends. I was shocked to hear that the CSA are only interested in his salary. The level of dividends he draws (or indeed could draw, were he to allow funds to build up in his company) is irrelevant apparently.
My friend is very willing to pay significant child maintenance for his son and can afford to pay more than the minimum. However this is all that CSA will direct him to pay due to their antiquated processes and systems. They also refuse to communicate by email.
He tells me that in trying to explain the position to CSA they indicated they are aware of the gap in the rules as they suspect many reluctant fathers leave their jobs and then get re-engaged on a contract basis through a service company so as to reduce the level of their relevant income for child support purposes.
This all sounds quite disgraceful - if it's true. Do any readers of AccountingWeb know what the position is here and how common it is?
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