In circumstances where a parent earns above the statutory child maintenance threshold of £156,000 per year, working out a fair and reasonable child maintenance payment could be challenging. Fortunately, the case of James v Seymour [2023] EWHC 844 (Fam) provided welcome clarity.
Handed down by Mr Justice Mostyn, the decision outlines a suggested approach for calculating maintenance when the paying parent earns more than £156,000 per year, the current statutory ceiling under the Child Maintenance Service scheme. While not binding, the judgment offers a practical framework for parents and legal professionals.
Background
Mr Seymour, a senior banking professional with an income of around £400,000 per year, had previously agreed to a child maintenance arrangement with Ms James. Several years later, Ms James applied to vary that order, seeking an increase in child maintenance.
Her argument was based on earlier case law, which had used the Child Maintenance Service formula (usually capped at £156,000 gross income) as a foundation for determining payments even where a parent’s income exceeded that cap.
What Did the Court Decide?
Mr Justice Mostyn’s judgment introduces several key principles which can be used as guidance and a starting point for families where the payor of child maintenance has an annual gross income above £156,000:
1. No Automatic Use of the CMS Formula for Variations
Where there is an existing child maintenance order, the court will not apply a formula automatically to determine a variation. A variation needs to be adjusted by a change in circumstances. Otherwise, the order adjusted for inflation is the starting point.
2. Criticism of Earlier Formula-Based Methods
The judgment criticised prior efforts to extend the Child Maintenance Service formula beyond its £156,000 limit. In Mr Justice Mostyn’s view, simply extrapolating the formula produces distorted and illogical results, particularly as income levels rise significantly.
3. Introduction of the Adjusted Formula Methodology (AFM)
To address the issue, Mr Justice Mostyn introduced the Adjusted Formula Methodology (AFM). This is a new framework for assessing child maintenance where gross income exceeds £156,000.
The approach begins with a calculation of the payor’s ‘exigible income’, defined as all earned compensation including any reward that is technically taxed as a capital gain. This figure is then adjusted to deduct the following:
- A percentage for any children living in the payor’s household; different percentages are applied depending on the number of children.
- Pension contributions.
- School fees (including extras).
- A proportion for the number of nights the children stay with the paying parent.
Once these deductions are applied, a set of fixed percentages (based on the number of children) is used to calculate the suggested maintenance amount. Mostyn helpfully provides tables at the end of the judgment to assist with the calculation.
This figure is known as the Child Support Starting Point (CSSP), a benchmark the court may consider, but is not bound to follow.
4. AFM Not Suitable for All Circumstances
The court made clear that this Adjusted Formula Methodology should not be used in all circumstances. Specifically, it should not be applied when:
- The paying parent earns more than £650,000 per year
- The paying parent lives off capital rather than income
- There are four or more children to be supported
- The parent’s income is largely unearned
5. Are Judges now Required to Follow the AFM?
No. At paragraph [43] of the judgment, Mr Justice Mostyn was explicit:
“I emphasise that at its highest the AFM produces a loose starting point which a decision maker can summarily choose to accept or reject without fear of appellate review.”
Judges retain unfettered discretion when assessing maintenance in circumstances where income exceeds £156,000 per year.
Practical Implications
While the AFM is not binding, it will prove influential. Courts are likely to use it unless there is a reason to take a different approach. For separated parents in these circumstances, it offers a useful starting point to help guide discussions and reach agreements without the need for Court intervention. It is likely to help some parents to reach an agreement and avoid the need for Court intervention and costly litigation.
Carrie Rudge, Consultant Solicitor.