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UK-based VAT-registered supplier - charging VAT on services to UK-based customer

My previous post got moved (buried) into another thread which does not answer my question, so I am posting it again. 


How do UK-based VAT-registered suppliers charge VAT on their services to UK-based customers using Upwork? Do we need to raise a separate VAT invoice directly to the client outside Upwork?


Please do not move this post as it requires an answer to this specific scenario which has not yet been provided in the community.

Community Member

AFAIR Upwork's Ts & Cs are that you can't charge outside of Upwork; thus you can't collect VAT & take payment for it outside of Upwork; thus Upwork are collecting VAT if you're VAT-registered; thus VAT is included in your rate.


And so yes, it seems that essentially you'd have to create a separate invoice (splitting the VAT out from your invoice amount, lowering your earnings), as Upwork itself will not engage you in this discussion and nor do I expect them to provide a technical solution for dealing with VAT on our services as freelancers and / or agencies.


My solution was... ditch the company and register as self-employed, and then my rate here is my rate, and I don't have VAT to deal with, until such time as I'm earning enough to have to VAT-register.


p.s. my understanding is that there's nothing preventing you from charging VAT on top of your services and putting that through Upwork as 'Bonus Payments'; I discussed this at the time with Upwork support.


If you were to do this, I'd re-check that with Upwork, but also make very clear on your profile and in your discussions with clients that you'll be doing so. That's the closest situation I could find to adding VAT when doing ordinary business outside of Upwork. 


You'd have to make it very clear at the outset if you were going to do that with (UK) clients, as ultimately the lack of explanation & adding of VAT by Upwork I find misleads clients into believing that VAT is already taken care of by the platform and is subsumed into the freelancer / agency's rates.


However, the official line as it was communicated to me is that how to charge for VAT is down to the freelancer. So whatever you do, it requires being up-front with your VAT-chargeable clients.



Community Member

Thanks very much for a detailed and helpful answer. I think you have confirmed my concerns that charging for VAT within the UK is pretty opaque on the platform. 


Unfortunately I personally do not have the option to de-register my company for VAT, nor to split my business as in my case HMRC would see it as pretty transparent revenue splitting for VAT purposes, thus not solving the problem and creating more problems.


Upwork's blurb says however that if you are VAT-registered, they do not charge VAT to the end customer but simply state that reverse-charge VAT may have to be accounted for by the end customer. This is a nonsense from a UK perspective, as except for certain construction activity, there is no such thing as reverse-charging for services UK to UK. VAT must be included in the charge. So the principle of how they are doing this is entirely wrong.


I agree re the transparency with the end customer, but it does seem like creating risk where it is unncessary. if Upwork were genuinely interested they would solve this problem, rather than refuse to acknowledge it. I think although there is some good stuff on the platform, it's evidently not (from my perspective) worth the compliance risk, which is a shame.


Thanks again.

Community Member

Thanks for your response, Jonathan – very good clarification / reminder on the non-applicability of reverse charging from a UK services perspective. 

Community Member

The only thing you can do is include the VAT in your hourly rate, because it's strictly against the terms of service for you to invoice clients off of Upwork.

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