Upwork as a Digital Platform / Marketplace - VAT Rules

[andrew-ussher]

I know that there have been many discussions around VAT invoices being provided on Upwork.

I am aware of the issue, so wanted to ask a specific question around the classification of Upwork as per the UK definition of a Digital Platform / Marketplace. The following is copied from the HRMC information at https://www.gov.uk/guidance/the-vat-rules-if-you-supply-digital-services-to-private-consumers#digita...
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Digital platforms and accounting for VAT

If you operate a digital platform that third-parties sell e-services through, you’re liable to account for the VAT on those sales unless you meet all of the following conditions:

digital platforms and everyone else involved in the supply must identify who the supplier is in their contractual arrangements
invoices, bills or sales receipts must identify that supplier and the service supplied
digital platforms must not:
authorise the charge to the consumer
authorise the delivery
set the general terms and conditions of the sale
If you do not meet all these conditions:

you must treat the sales of third-party e-services as if they were your own
you must declare any VAT that is due
the responsibility for accounting for any VAT moves back to the person who supplied you if you’re giving intermediary services to that person

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Under these conditions / rules does Upwork not fall under the requirements to charge VAT ?

Thanks.

[petra_r]

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Andrew U wrote:
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Under these conditions / rules does Upwork not fall under the requirements to charge VAT ?

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You missed the point. The entire text you quoted talks about VAT on the services the freelancers ("third parties") sell.

Upwork is not charging VAT on the services the third parties  (the freelancers) sell.

Upwork is only charging VAT on the services they (Upwork) sell to you (the service fee and connects / membership)

[andrew-ussher]

I fully understand the charges of VAT on the service fees. But under UK rules it is not up to Upwork to determine whether or not to charge VAT when they invoice my clients.

If they fall under the category above, they are then under the obligation to charge vat to the end client as well.

I wish that someone would give a proper definitive answer instead of just assuming we are stupid and don’t know what we are asking.

If Upwork wish to make decisions on my behalf regarding terms and conditions that cover my contracts, and control the timing of invoices then the rules above apply.

[feed_my_eyes]

Upwork doesn't need to charge VAT to your clients, they only need to charge VAT to you, because clients don't pay Upwork directly (i.e. clients pay freelancers, and Upwork takes commission FROM FREELANCERS, not from clients). But you may need to charge VAT to your clients if you're above the income threshold (£60,000 in the UK). That's not for Upwork to decide or get involved in; you need to sort your own tax situation and register for VAT if necessary.

[andrew-ussher]

Christine, thanks for your reply.

The VAT threshold in the UK is now set at £85,000 so it has risen from the figure quoted.

I know that Upwork states that the relationship is between a client and a freelancer, and therefore they do not have any part in that relationship. However, based on the UK rules around what constitutes a digital marketplace this may or may not stand up in court.

Why does that matter? In the user agreement we have the following

"if outside of the United States, for determining if Upwork is required by applicable law to withhold any amount of the Freelancer Fees and for notifying Upwork of any such requirement and indemnifying Upwork for any requirement to pay any withholding amount to the appropriate authorities (including penalties and interest)"

I believe that Upwork is a digital marketplace, and as such in the UK they are required to charge VAT on "sales" made through their platform to clients in the UK. That means that all Upwork invoices should be +VAT when sent to my UK clients.

If this is the case then do I have a duty (under what is stated in the paragraph above) to notify Upwork of this fact?

Upwork seem to wash their hand of the entire matter and instead of addressing the issue they say "it is nothing to do with us". I would accept this if it was not for the fact they are sending my client invoices in my business name that do not allow me or my clients to comply with UK law. If addressing the VAT issue is my responsability then let me do it and allow me control over invoicing.

Any help appreciated if anybody has ever approached HMRC with regards to whether or not Upwork comes under the category of a Digital Marketplace and therefore needs to charge VAT on all services provided through it.

THanks

[andrew-ussher]

I am trying to complile all relevant links in this one post, as I would like to think it may be helpful to others as well...

Providing Digital Services To Companies In The EU
https://www.gov.uk/guidance/the-vat-rules-if-you-supply-digital-services-to-private-consumers

[andrew-ussher]

A similar scenario related to the Reverse Charge mechanism.... May or may not be relevant

https://www.icaew.com/insights/viewpoints-on-the-news/archive/hmrc-opens-uber-investigation

[feed_my_eyes]

The difference between Upwork and Uber is that it sounds like Uber is NOT paying VAT on the service charges that they receive from their drivers; they're using a loophole to avoid it.