Self employed ex - what counts as income

Hi,

Long story so please bear with me.

We have a house worth 400k which after consulting solicitors, stbx has agreed he will pay me 210k to find a new house solely in my name. He wants to stay in this house as he helped build the extention etc.

We're now talking about how much maintenance he'll pay. He's saying he'll pay 20% (as per CSA guidelines) on his salary of £7800 per annum. He says he can't pay more than that as he's going to be paying a business loan (that he is going to get to buy me my house) which will cost him approx 2k per month and he'll have his own household bills, approx £700 per month. So he's saying 30 per week is all he can afford to pay in maintenance. My thoughts are though, that if we sold the house, both bought new house (mortgage free!) he'd have more than enough money to pay me more child maintenance to help raise our children. It's through his decision to stay in a huge house and get a business loan to pay for my half, that means he'll not have enough to pay anything for our boys.

How does the 'income' thing work through the CSA. Is it just what he pays as a salary? Because the way I see it he'll have to have at least £3k coming in per month to pay this loan and his own living costs. Or because it's a business loan, does that mean it's not classed as what he has to pay personally for his own upkeep.

I'm very confused and worried as I don't think I'll be able to afford to pay everything bills wise and for our children on my very basic childminding income (I've only just started childminding, so don't have much work yet). Obviously I'll get benefits, but even working out what I'll be entitled to benefits wise, I'm still left with too little to cover the costs of a house and bringing up the children. I don't think I'd even be able to get a mortgage to help for a few years as I've only just set up my childminding business. My 2 children are both under 5 at the moment, so even if I went out to work, I'd have to pay childcare costs, which would wipe out my salary!

Help!!!!!

Katy

There is a thread on here about how hard it is to prove how much income a self employed NRP actually declares as opposed to what the actual income is and what is reflected in the way they live 'lifestyle' where their expenditure often exceeds what they have stated their income to be.

So I guess it won't be about whether he pays himself a salary, it will be how much he is declaring. He might declare quite a low salary and the rest in dividends (as I believe they are not taken into consideration - though don't quote me). It is almost impossible to get the CSA to accept any kind of incriminating evidence outside of what your ex will provide.

I would imagine that trying to negotiate a more suitable deal for yourself would be best, and try mediation if you can't agree a settlement between you before you resort to solicitors.

Dividends are not taken into account as a matter of routine. But they are if you ask for a variation.

Is he running his business above board? Does he meet tax deadlines, VAT declaring deadlines, PAYE deadlines etc. etc? If so, you might stand a chance of getting the 'correct' amount through the CSA. But it's only a might. Half decent accountants can make a lot of income disappear legally which is a problem.

Re: the house situation. Have you suggested mediation? It doesn't sound like you've come to the fairest of solutions. What does your solicitor say? Does he mean director's loan (ie. the business lends him money) or business loan (whereby the bank lends the business money)? I'm not sure his business could take out a loan to simply pay off the ex wife (you'd think not, in the current financial climate, you'd certainly think the banks would be looking at loan applications with more care) but he could take a director's loan from his business to buy you out (I think). If a director's loan, you could discuss with the CSA what might happen if you applied for a variation but don't expect them to give you a straight answer (and if you phone 3 times, you'll probably get 3 answers!).

Sorry, clear as mud.

Have you claimed Tax Credits etc.? You make no mention of this in your thread so it's worth a look if you haven't as this will boost your income.

Most of his business is above board, although I do think there are a few 'dodgy' transactions - ie half cash half invoiced.

It is definately a business loan - not a directors loan. The bank agreed this based on the circumstances of us separating and him having to buy me a house, so it is a business loan to buy me out of our house. I thought it was unusual for them to agree to it, but apparently they have.

He meets deadlines through his business for tax etc. He does have PAYE for his employees, so guess he pays what he has to on time.

He doesn't pay himself dividends as there is already a directors loan account, so he just dips in and out of that (I believe) and he only pays himself 7k per year salary. Although I was always paid a small salary through the company too.

Yes, we have claimed WTC for the last half a year and I will continue to do so in my own name. I've worked out I'll have approx £1100 per month into my household taking into account everything, my income from childminding, £30 CM from him per week, child benefit, council tax benefit, WTC and CTC. I think I would just about be able to afford to survive, but wont be able to do any extras like saving up for christmas/birthday presents, holidays (although my parents would probably pay for us to with them to Haven), rainy day money in case something goes wrong with the house etc. I guess if it came down to it, I'd just train to do something like teaching/nursing etc when the boys go to school.

We went to a mediator orginally, who told us to go and get advice from individual solicitors, which we've both done. We're now at the point of trying to get an agreement between ourselves, to go back to the mediator who will write it all up in a financial settlement, which we'll then gte checked by our own solicitors before applying for the divorce etc.

What worries me is that he is an extremely shrewd businessman and that I am being done over. He is going to be barely contributing to the upbringing of our boys, which really doesn't seem fair. But I guess anything is better than nothing, I know I'll manage on my own - it will be a struggle for the next few years, but it will be more affordable in the long run, once my business is established, or I go back to work full time.

so he's going to be 'over-housed' as it were?

the problem is, the HMRC obviously accept his declared income as correct (you indicate the low salary is something that has been going on for a while - very common situation) and as such, he's not going to pay any more maintenance unless he wants to.

Have you seen the paperwork agreeing the business loan? Are you a company director by any chance?

You might do well to have a look in the Ancillary Relief forums and post your full financial circumstances and let people have a look at that for you. As you're describing things, it doesn't sound very fair, I agree, although it does often seem to be the case where self employment is concerned.

Is he prepared to consider making payments for childcare or swimming lessons or other activities rather than just give you maintenance? Many NRPs do have an issue (or at least seem to) with handing out cash to the ex so if you can get him to pay for things directly, this could be a way round things.

If you haven't already, call the CSA and run the situation past them. Ask to speak with someone trained in self-employment issues (as I have a letter from Maria Miller stating quite clearly that such people do exist - I have my doubts!) and see what they say.

Sorry not to be more help - it is a minefield and not one which works in favour of the children living with the PWC where self employment is concerned. On the plus side, if you are a half decent childminder, you will find that within a short period of time, people should be queuing at your door so hopefully you can up your income that way and not be reliant on the ex's maintenance.

Will your share of the equality allow you to buy a house mortgage free?

Difficult situation as any attempts for more CSA or spousal maintenance will come up against the same problem.

I would try and negotiate a larger slice of the house.

Yes, I'll have a mortgage free house.

Stbx has now come back to me to say he's happy to increase his maintenance to £240pm and also to continue paying me a salary through the company. So he will increase my childminding income up to £450pm.

SO this month I have £99 coming in from looking after my friend's little girl, so he will pay me £351 this month as a salary and £240 maintenance. If I got took on a child increasing my childminding income, he will decrease the company salary, until the point I'm earning over £450pm, then he will only pay me the £240 maintenance. If I get loads of business and earn far more, leaving me comfortably off, we will then discuss the maintenance payment as I may be able to manage without it.

I think this seems alot fairer and would enable me to not worry about paying the bills for the first year or so while my business is getting started.

I am a company director and no, I haven't seen the business loan paperwork. However, part of the agreement to give me half of the marital assets at the moment, will be that I am taken off the business - whether this means we close the current ltd company and he opens another, I'm not sure. I think he wants to ensure that in the future I have no say over dividends etc.

He has indicated that if I need help with a large payment, (such as when our youngest moves out of a cot into a bed, I'll need to buy a bed for him) he will consider each individual thing/item as it comes up.

I think I feel happier now that he will continue to pay a little bit more while I'm building my business. I think at the end of the day, he really does want the best for the boys and similarly, I want us both to be able to live fairly comfortably. I would feel awful if I was living well and he was scraping about for food each month.

Katy