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Paying VAT

digitaljacker
Active Member
Jack K Member Since: Jun 3, 2020
1 of 8

Hi, I am a freelancer in the UK. Of course, like all, on my reports I see the VAT that I am being charged.

 

Please could someone explain how this works? I know that the VAT is only on the service fee that upwork charge, not the actual money I earn after that fee (if that makes sense). 

 

So, let's say the fee for one week, for one client is $20, I would pay $2 in VAT. Is that $2 coming out of my pocket, so I am really paying $22 for that client, or is that $2 coming out of the $20 service fee, so $18 to upwork and $2 to VAT?

 

If that is the case that I am paying for it, so I am paying $22 for that week, how do I go about claiming this VAT back, or not pay for this, as I am not VAT registered?

 

Thanks

Jack

feed_my_eyes
Community Guru
Christine A Member Since: May 4, 2016
BEST ANSWER
2 of 8
Yes, VAT comes out of the money you earn, so like any expense, you should make sure that you're charging your clients enough to cover this. You have to pay if you're not VAT registered, just like you do for all goods and services that you purchase in the UK. (If you're not VAT registered, that just means that you don't have to charge your own clients VAT - as long as your income is below the threshold - but Upwork needs to charge you VAT for THEIR services.)

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digitaljacker
Active Member
Jack K Member Since: Jun 3, 2020
3 of 8

That clears it up, thanks! 

craftandsew75
Active Member
Ruby B Member Since: Jan 19, 2020
4 of 8
That doesn't make sense. Essentially you are providing a work service, not buying and selling goods. An employer doesn't charge you VAT for your work and you wouldn't see it on a payslip. What is the service fee for if you are paying VAT on top? I put this concern to my friend who works for UK tax office PARTICULARLY VAT. He says he doesn't understand why you are being charged for this within your 'payments' as it was. I will speak to the tax office tomorrow and see if there's something further to explain on this.
diana-arous
Ace Contributor
Diana A Member Since: Jun 14, 2016
5 of 8

Ruby B wrote:
That doesn't make sense. Essentially you are providing a work service, not buying and selling goods. An employer doesn't charge you VAT for your work and you wouldn't see it on a payslip. What is the service fee for if you are paying VAT on top? I put this concern to my friend who works for UK tax office PARTICULARLY VAT. He says he doesn't understand why you are being charged for this within your 'payments' as it was. I will speak to the tax office tomorrow and see if there's something further to explain on this.

I agree, it's frusterating to come back to upwork to see that i'm gonna lose even more money with every service i give, wish there was a way to avoid this :/ i'm still paying taxes in my country as well, nothing will be left in this case man

barranger_nicky
Active Member
Nicky B Member Since: Jan 20, 2021
6 of 8

Thank you all for these helpful comments. I also find this incredibly confusing (and I have been VAT registered in the UK for years)

What I don't understand is why I am having to pay VAT on a service in the US?

barranger_nicky
Active Member
Nicky B Member Since: Jan 20, 2021
7 of 8

I know, I know - I'im replying to my own question... but in case anyone is interested, I found this deep in Upwork help area  - so I thought I'd share it with you. Now that the UK has left the EU, that throws up more questions but I need a lie down before I go there!

 

"Upwork is an online platform that brings freelancers and clients together. As our membership and activity have continued to grow in the EU, assessing VAT is an important element to continue providing services there.

Based on Directive 2006/112/EC ("EU VAT Directive") Upwork's services qualify as electronically supplied services (ESS), which are subject to VAT at the place where the customer (i.e. the freelancer) is established or resides.

Therefore, the services supplied by Upwork to freelancers who reside, have a permanent address, or are established in the European Union are subject to VAT there. Upwork is responsible for charging, collecting and remitting this VAT when providing these services to our EU customers.

Note: When a freelancer submits a valid, EU formatted VAT number to Upwork we don't charge VAT. In these cases, the VAT may still be due but would be "reverse charged" to the freelancer. In other words, these freelancers will have to personally report any VAT that is due for Upwork's services".

edtom88
Active Member
Edwige T Member Since: Mar 30, 2021
8 of 8

I think I understood, but why did they charge me VAT since I do have and provided a valid French VAT number?

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