Self-employed income in a maintenance dispute

Business turnover, taxable profit and money available to a parent are different figures. In a self-employed maintenance dispute, identify the figure CMS has used before arguing that the business earns more or less than the calculation suggests.

Reconcile the tax and business periods

Collect the relevant tax calculation, tax return and accounts where lawfully available. Note the accounting year and whether it matches the period CMS is considering. A bank statement showing customer receipts does not account for all business expenses; an expense in accounts does not automatically establish its treatment for maintenance.

Separate sole-trader profits from company salary, dividends and director's loan transactions. A company bank balance belongs to the company and should not simply be described as personal wages.

Identify a specific variation issue

CMS has a variation process for certain other income and expenses, including some concerns about income diversion. ^[1] Explain the transaction or income stream you want considered, its approximate period and the documents supporting the concern. Lifestyle observations alone may leave the calculation issue unclear.

Do not obtain private tax records by accessing another person's account. Explain gaps and ask what CMS can investigate. Changes of income deals with reassessment; challenging a calculation explains how a disagreement with a decision differs from supplying new facts.

Identify the person and business structure behind each figure Begin by establishing whether the parent trades personally, operates through a partnership or receives income from a company. The structure affects what the accounts describe. A sole trader's sales, a partnership share and a company director's salary should not be placed in one column labelled business income without explanation. Record the name of the business and the relevant period, together with the document from which each figure was taken. This helps CMS or an adviser identify the actual calculation question.

For company involvement, distinguish payments to the individual from money remaining in the business. Salary, dividends, reimbursed expenses and a director's loan entry can represent different transactions. A transfer between company accounts may not be a personal receipt at all. Conversely, a low salary does not necessarily describe every source of the individual's income. The government's variation guidance identifies other income and potential diversion as matters that can be raised through a specific process. ^[1]

Explain why accounts and tax information differ Accounts may cover a different year from the tax information used in a calculation. Note the relevant dates before comparing totals and explain any business start, closure or change of accounting period. Identify whether a figure is turnover, profit before tax, taxable profit or drawings. A large difference may have an ordinary accounting explanation, but it may still require clarification. The useful request is to reconcile the figures and their treatment, rather than assume that whichever number is largest must be the maintenance income.

Where you are supplying your own records, provide the relevant complete documents and flag unusual items. One-off receipts, losses, adjustments or expenses should be identifiable without requiring the reader to reconstruct the accounts from selected screenshots. If an accountant's explanation is available, keep it linked to the particular entry and period. Do not describe an item as accepted for maintenance merely because it appears in filed accounts or a tax return. CMS must apply the rules governing its own assessment.

Turn a concern about hidden income into an assessable issue State the income source or arrangement you believe has not been considered, the approximate amount or period where known, and the facts supporting that belief. For example, a concern about dividends requires different information from a concern that earnings have been redirected to another person. Explain what is documented and what is inferred. An expensive purchase may raise a question, but it does not by itself establish whether it was financed through income, borrowing, a company transaction or someone else's money.

Ask whether the issue falls within a variation and what information CMS needs to consider it. Both parents can raise relevant other income and assets under the official guidance, while the permitted expense questions have their own requirements. Avoid combining every disputed business cost into an unsupported allegation of fraud. A precise description gives the decision-maker a clearer route to examine the concern and reduces the risk that a valid point is lost within speculation about the parent's entire lifestyle. ^[1]

Keep disclosure, investigation and challenge distinct Provide records you hold lawfully and explain where evidence may exist but is unavailable to you. Public business information can identify a company or filing, yet may not show the individual's current income. Do not enter private tax accounts, impersonate the parent or pressure employees to disclose confidential payroll information. Ask CMS what enquiries it can make and what further information it requires from you. The absence of personal access to another person's accounts does not justify unsafe or unlawful collection.

Once CMS decides the issue, identify the income treatment and effective period in its response. A variation request, a report of a later earnings change and a challenge to an issued decision are separate procedural events. If you disagree with the decision, follow the applicable reconsideration or appeal information rather than repeatedly resending the same allegation without identifying the finding contested. Continue to maintain payment records while the issue is addressed, so an unresolved income dispute does not obscure what the current assessment requires.