In advance of his retirement this summer, High Court judge, Mr Justice Mostyn, has recently produced two important judgments in relation to the quantification of child maintenance in cases where parents earn more than £156,000 gross per annum.

Ellie Hampson-Jones explains the ‘Mostyn formula’, and a recent ‘adjustment’ for payers earning more than £156,000 but less than £650,000 gross, per annum.

 

How is child maintenance calculated?

If the paying party earns less than £156,000 gross per annum, and both they and the child are resident in England and Wales, the payor will be subject to a child maintenance assessment and any child maintenance payable will be calculated via a standard formula by the Child Maintenance Service (‘CMS’).

Where a payor’s gross income exceeds £156,000 per annum, the court has jurisdiction to determine child maintenance. Twenty years ago, Mr Justice Mostyn suggested that the CMS’ formula offered a useful starting point for the court in these kinds of cases. Subsequent judgments supported this, stating that the CMS formula was ‘informative’. Mr Justice Mostyn continued to adopt this approach and provided further guidance: in TW & TM (Minors) and CB v KB he concluded that where a payor’s income exceeded the statutory ceiling but was not “un-adjacent” to it, particularly for incomes between £156,000 and £650,000, the formula would continue to provide useful guidance.

Mr Justice Moor considered the ‘Mostyn formula’ in his judgment CMX v EJX (French Marriage Contract) [2022] EWFC 136. Moor J recognised the ‘beauty’ of Mostyn J’s formula in that it made the figure easy to calculate, thus reducing dispute, but he also felt that there were disadvantages. For example, the Mostyn formula produced anomalies where there was more than one child because whilst it makes adjustment for the number of children, its primary driver is the percentage of the payor’s adjusted gross income.

 

Observations in James v Seymour

In the case of James v Seymour [2023], Mr Justice Mostyn addressed this issue.  Data on the formula indicated that extending the formula to incomes in the range of £156,001 to £650,000 could produce unrealistically high outcomes.

It also showed that the calculation for a single child was not reasonably proportionate to the calculation for a child in a sibling duo or trio. For example, under the formula where the payor’s income is £650,000 (and there is no shared care and no other child living with the payor), the formula produced the following outcome:

  • £60,000 for a single child;
  • £40,000 for each of two children; and
  • £33,000 for each of three children.

Mr Justice Mostyn observed that whilst there would be economies of scale where there is more than one child in a family unit, it was obvious that a single child does not cost anything like 50% more to rear than each of a pair of children, let alone 80% more than each a trio of children.

 

The James v Seymour judgment seeks to address these issues.

 

The adjusted formula

Mr Justice Mostyn determined that the ‘Child Support Starting Point’ in cases where the income range is between £156,001 and £650,000 is as follows:

  1. Identify the payer’s gross weekly income, for example by looking at the payer’s most recent P60 or tax return. Earned income includes all earned compensation, including any reward that is technically taxed as a capital gain.
  2. Reduce it by the number of children living in the payer’s household, ie: 11% for one child, 14% if there are two, 16% for three or more.
  3. Deduct any relievable pension contributions.
  4. Gross up any school fees paid by the payer by the amount of income tax paid by the payer so it reflects that school fees are paid from net income.
  5. Apply the CMS formula rate:
    1. For the first £800 per month: 12% for one child, 16% for two and 19% for three children.
    2. For the balance of the income over £800 and up to £12,200 (i.e. £13,000 per month or £156,000 per annum): 9% for one child, 12% for two and 15% for three children.
  6. Apply the above formula to the first £156,000 to effectively achieve the CMS outcome on that figure. The balance between £156,000 and the income earned up to £650,000 is then subject to a tariff of 2.4% for a single child and 3% for each of two or three children.

An example comparing the old ‘Mostyn’ formula with what would now be payable under an the adjusted formula is set out below:

Income No. of Children (no shared care)

CMS formula

No. of Children (no shared care)

Adjusted Formula

No. of Children (no shared care)

CMS formula

No. of Children (no shared care)

Adjusted Formula

1 1 2 2
£156,000 £15,300 £15,300 £10,200 £10,200
£175,000 £17,000 £15,700 £11,300 £10,800
£195,000 £18,800 £16,200 £12,500 £11,400

 

  1. Reduce by the number of nights the child spends with the payer (as per the below)
Nights per annum with payer Reduction in payments as a result of shared care
<52 Nil
52-103 1/7th
104-155 2/7ths
156-175 3/7ths
176-183 Equal

 

In preparing the adjusted formula, Mr Justice Mostyn made it clear that it will not be relevant where:

  • there are four or more children;
  • a payer’s gross income is more than £650,000;
  • the payer’s income is largely unearned;
  • the payer lives on capital;
  • the application is for a variation of an existing child maintenance order. In this circumstance, the value of the original order adjusted by inflation should normally be used as the Child Support Starting Point.

Mr Justice Mostyn also made it clear in this judgment that the lifestyle of the children between the payer’s household and the recipient’s will only require meaningful comparison where the child maintenance claim includes a claim for a Household Expenditure Child Support Award (‘HECSA’). For separate exploration of claims of this type, one should consider Mr Justice Mostyn’s judgment in Collardeau-Fuchs v Fuchs [2022] EWFC 135.

 

Comment

Partner Lucy Stewart-Gould concludes:

“Current data indicates that in the last 10 years there has been a 2.3-fold increase in taxpayers earning more than £150,000 per annum. Mr Justice Mostyn’s judgment provides valuable clarity to those falling in this higher income bracket and should help to reduce dispute. Those who earn more than £650,000 of course remain subject to greater discretionary powers.

 


 

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