Employer loans taken into consideration for child support

A mother has successfully argued that loans were part of her ex-husband’s income, and should therefore be included for the purpose of the child support maintenance assessment.

The father, described as a “highly skilled person testing computer software”, declared that his earned income was just £12,345 per annum net of tax.

However, he also received other sums from his employer, which he claimed were loans that were repayable.

The loans were not regular and the amounts varied from year to year, but in round terms they brought the father’s net annual income up to around £80,000.

The issue had already been considered by the Family Court, in connection with an application by the mother for financial provision for the children under Schedule 1 of the Children Act.

In those proceedings, the District Judge had made a very clear finding regarding the father’s income: “Would he do the job for which he is employed to for that sort of money? The answer comes a clear “no”.

“He has another source of income … He receives regular payments which are said to be “loans”. … The father says that … HM Revenue and Customs … have approved the scheme to the extent that they say that no tax is payable on these payments presumably because there is a theoretical yet contractual right to recover the payments.

“To my mind his loan payments are as much part of the father’s income as payments which are made and subject of PAYE deductions. It is simply a tax efficient way of the payments being made to him and, as far as it goes, HMRC have said that those payments are not taxable.

“However I do not accept that [the employer] will ever seek to recover those payments.”

The District Judge’s findings were accepted by the First-Tier Tribunal in the child support proceedings, and the father appealed to the Upper Tribunal, who dismissed the father’s case.