9:15 AM, 7th March 2023, About 9 months ago 16
I have the unfortunate situation whereby the Child Maintenance Service looks at my pre-tax earnings for their calculation. Obviously, that means they “think” that my mortgage costs are earnings and so charge me 12% of that figure.
Given I am a lower tax band earner and that my BTL mortgage costs exceed 80% of my pre-tax earnings, this nearly doubles that which I actually earn. In effect, it puts me into the 40% tax bracket as that 12% that the CMS takes is pre-income tax, and there is no deduction in personal tax for CMS payments.
I spent 18 months complaining and arguing with them, but they are like a thick fog of stupidity and jobsworths. Their responses showed a lack of responsibility or concern or comprehension.
Included in my complaints was a letter from my accountant, they paid no heed to this.
I approached the HMRC technical department and the first gentleman I spoke to agreed the effect of the S24 process upon the CMS calculation was an unintended consequence. I asked if he would write me a letter for the CMS to which he agreed.
When the letter came it had nothing of our conversation, it only technically explained S24, which frankly my accountant and I had tried in vain. I then phoned HMRC again, but could not speak to this gentleman and ended up with a lady who repeatedly told me over and over that it was not her job.
I tried to stop paying the CMS and approached the ex directly, she was and remains un-empathic about the situation and just reported me to the CMS and they then, without due process, started to remove money from my bank account. I now pay 20% on top of the previous unjust figure as the CMS ad this fee for their own processing.
With mortgage rates doubling, you can see how this then increases my mortgage costs to above 100% of that which I actually earn. It is a dire situation, and if I sell the properties, of course the CGT then also gets added to my tax for CMS charges. It is a downward spiral of insolvency.
If it wasn’t for the fact that I was fortunate to buy my properties at the lows of 2009-2012, I’m sure I would be wiped out by now.
My portfolio was never enough to warrant moving to a Ltd co structure, and half of them are partly owned also.
The whole point of the CMS is allegedly to support children in retaining a decent standard of living. This is in practice not true.