Paystream limited companies query

[Ubiquitous]

Hi all,

I've been contracting for a little while through an umbrella company but recently got a new contract job and the agency suggested that I get in touch with Paystream to see whether a limited company would be a better solution for me.

I spoke to them and gave the relevant details of my contract including hourly rate, etc etc, and they emailed me a breakdown of what they could offer. One thing in particular puzzled me, and I wanted to run it by others who have more experience with such things. They advised me that they would be able to get me 89% of my gross earnings after their fees and taxes. When I looked at the details though, I saw that they had included an estimation of £140/week in expenses. I'm not disputing the expenses as it may be possible that I would be able to justify £140/week in expenses including travel, however, Paystream appear to have added the full £140 of expenses as 'income'. As I understand it, this shouldn't be the case, because if you have an expense (eg train ticket), you have to first pay for it out of pocket and then be reimbursed by your limited company. As such, as you're not GAINING the money spent on the expense, you're simply having the company to pay for it so as to reduce the taxable income of the company. If I understand correctly, given corporation tax of 20%, that would mean that there would be a net gain of £28/week compared to paying for it yourself, rather than £140/week.

Has anyone else dealt with Paystream and am I right in thinking that they are being quite dishonest with how much of your gross earnings they can provide? I've attached a screenshot of their breakdown in the link below in case it helps to understand my question better. I did flag it when speaking to them initially as it didn't make sense to me, but they assured me the breakdown was all correct and there was nothing to be concerned by. It was only after finishing the call and thinking about it further that was confident that they were being over creative with their numbers. What do you think of their breakdown? Is there anything else I should be wary of?

Breakdown screen capture:
http://s12.postimg.org/v7pto7bwt/Paystream.jpg

[cojak]

Paystream limited companies query

See this thread: http://forums.contractoruk.com/showpost.php?p=1262428

If they've changed from this business model then great!

[LisaContractorUmbrella]

Well that doesn't look right

£200.00 salary
£140.00 expenses
£563.54 dividends

Total £903.54 but that's shown as your take home pay - there's no deduction for the provider's fees or corp tax or PAYE tax even though they're shown as entries on the 'payslip'

Am I missing something here???

[pr1]

Well that doesn't look right

£200.00 salary
£140.00 expenses
£563.54 dividends

Total £903.54 but that's shown as your take home pay - there's no deduction for the provider's fees or corp tax or PAYE tax even though they're shown as entries on the 'payslip'

Am I missing something here???

looks ok?
total income - salary - expenses - PayStream Charge = profit
1081.35 - 200 - 140 - 36.92 = 704.43

corp tax = 20% of profit = 140.89

net dividend = 80% of profit = 563.54

net "pay" to client = salary + expenses + net dividend
= 200 + 140 + 563.54
= 903.54

but to OP - you're right they're counting the "expenses" in your "take home pay" when they'll actually be spent on business-necessary things (otherwise they won't be valid expenses)

they've also used 11% as your FRS percentage (perhaps you told them this?) - so your "VAT Credit" (as they call it) might actually be less if you were on the more common 13.5/14.5 band

they've also assumed you're working 52 weeks per year, so take the yearly figure with a pinch of salt... everyone needs a day off

edit: I would suggest there are more transparent accountants available who all have lots of experience with contractors, for considerably less than £160/month

edit2: they didn't include employees NI in the calculations but that's only going to be about £250 across the year

[Danglekt]

It depends what they are classing as expenses I suppose - @ 45p per mile there is a element of retained income in most peoples mileage unless they run a new car and are taking the depreciation hit like a mug...but I agree in the principle that it's not really take home pay in the truest sense.

[Waldorf]

This looks misleading at best.

Some of the points people have already mentioned but to summarise:

1. Assumes 52 weeks work per annum, this does not even allow for bank holidays, most comparisons use 46 weeks.

2. Uses Flat Rate VAT of 11% - be careful, this is your responsibility, do not let them push you into a category that does not fit.

3. What type of expenses are within the £140? Whilst some are paid to you, such as mileage, some are not such as mobile phone etc. Including this is usual but be aware that this is only to gain tax relief and is not a real gain.

4. Paystreams website mentions that their fee is £150+VAT, which is £180 so not sure where £160 comes from.

5. The example does not include employee or employer NIC - small amounts but if they miss this as well as others above what else have they missed.

6. Ask you recruiter how much referral fee they will get if you sign up with Paystream, you may then question whether the referral is impartial!

7. There is the new higher tax on dividends from April, not unreasonable to exclude this at this stage but bear it in mind.

8. Even if their fees are £160 per month and not the £180 listed on the website, you can get better service for a much lower fee.

9. I would avoid old MSC companies who converted to accountants, they usually get a bad press.

Nixon Williams have a good calculator, have a look, it allows you to vary the elements.

[Yonmons]

I`m presently using paystream as my "brolly" after 6 months I have no issues, however they constantly mither me (mither thats a northern word for you southerners) to go LTD, in either of the two flavours they offer. I just ignore them now, the brolly situation suits me for the time being, I have operated under Ltd companies in the past, and when I need one i`ll set one up, and use an accountant last one I used was about 80 quid a month, that price quoted is outragous, and to blart figures at you like that of what you can earn and how you are going to operate is pure pie in the sky.

[LisaContractorUmbrella]

I`m presently using paystream as my "brolly" after 6 months I have no issues, however they constantly mither me (mither thats a northern word for you southerners) to go LTD, in either of the two flavours they offer. I just ignore them now, the brolly situation suits me for the time being, I have operated under Ltd companies in the past, and when I need one i`ll set one up, and use an accountant last one I used was about 80 quid a month, that price quoted is outragous, and to blart figures at you like that of what you can earn and how you are going to operate is pure pie in the sky.

I'm intrigued - what are the 2 'flavours'

[SlipTheJab]

...

6. Ask you recruiter how much referral fee they will get if you sign up with Paystream, you may then question whether the referral is impartial!

...

You can bet your bottom dollar they are getting a bung, a lot of Pimps recommend the equally useless Churchill Knight for the same reason.

[Fred Bloggs]

I think the lesson from experience is that the ex-MSC providers like Brookson, Paystream etc are generally pretty expensive options as well as poor service providers. Plenty of reasonably priced proper accountants out there.