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VAT charge

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Ace Contributor
Ailsa C Member Since: Jul 26, 2015
1 of 26

Can't believe this - Upwork takes a VAT charge from UK freelancers - but as a freelance editor and translator, I am NOT liable for VAT. I pay income tax, but I do NOT pay VAT. (I did check with Inland Revenue to be absolutely sure.)

Is this ignorance on Upwork's part, or dishonesty?

Community Leader
Teri S Member Since: Oct 17, 2011
2 of 26

@Ailsa C wrote:

Can't believe this - Upwork takes a VAT charge from UK freelancers - but as a freelance editor and translator, I am NOT liable for VAT. I pay income tax, but I do NOT pay VAT. (I did check with Inland Revenue to be absolutely sure.)

Is this ignorance on Upwork's part, or dishonesty?


You are not liable to charge VAT on the services you sell, but you are liable to pay VAT on the services you buy. You are buying Upwork's services through the 10% service fee and other fees. You pay VAT on this service just the same way you pay VAT on any other service you buy, such as Internet sevices. 

Community Guru
Nichola L Member Since: Mar 13, 2015
3 of 26

The point is though, that when it comes to services, in certain cases in France and in UK (although it is structured differently) service providers do not PAY VAT to the government. Nor do they charge VAT to their clients. In France, anyway, a declared  autoentrepreneur is not allowed to charge VAT to a client, which means that, he or she does not pay the French government the  equivalent VAT that other providers, such as a restaurant, for example, would have to pay.  

 

So for those people for whom it would be illegal to charge VAT, there ought to be some kind of payback system from Upwork. The end user - the client - is the person who should have to pay the VAT. It is not Upwork providing the service, but the freelancer. Upwork, according to its own ToS is merely an introductory vehicle.  So in fact, it should be exacting the 2+% from the freelancer's client, not from the freelancer.

 

Upwork provides a service to both freelancer and client. It is unfair to expect a freelancer to swallow a charge that he or she is not likely to be able to uphold in the face of their competition who does not have to pay VAT at all.

 

For any non-European freelancer, the basic 10% charge remains intact. It is certainly not a level playing field.

 

 

 

 

Community Guru
Petra R Member Since: Aug 3, 2011
4 of 26

@Nichola L wrote:

 In France, anyway, a declared  autoentrepreneur is not allowed to charge VAT to a client, which means that, he or she does not pay the French government the  equivalent VAT that other providers, such as a restaurant, for example, would have to pay. 

 


 You pay VAT every day. Every time you go into a shop and buy something you pay VAT. The service charge is the same.

 

We all pay VAT. We just didn't have to pay it on the service we bought from Upwork so far but the laws have changed.

 

When you go into a shop and buy  some presents you pay VAT.

 

If you do not, let me know how you manage that Smiley Wink

 

 

Community Guru
Nichola L Member Since: Mar 13, 2015
5 of 26

Petra, I did not say that I as a consumer do not pay VAT in France - of course I do. So if I go to a restaurant I pay VAT. The restaurateur charges me VAT. The restaurateur pays that amount to the government.

 

However, as a consumer, I have legitimately  employed various people to work on my house and in my garden who are declared as autoentrepreneurs. I do not pay VAT, as they are not allowed to charge me VAT.

 

I can only speak for the way I am declared in France. But  there is a grey area in that there is a  difference between Upwork and the restaurateur:  on Upwork I am not only a consumer, I am also a provider. It is true that I pay Upwork a fee to introduce me to a client. But the services Upwork provides, covers the end consumer, the client, more than it covers me, the provider. 

 

 

 

Community Guru
Petra R Member Since: Aug 3, 2011
6 of 26

@Nichola L wrote:

Petra, I did not say that I as a consumer do not pay VAT in France - of course I do. So if I go to a restaurant I pay VAT. The restaurateur charges me VAT. The restaurateur pays that amount to the government.


 You pay Upwork a fee. Now youpay VAT as part of that fee. Upwork pays that amount to the French govvernment.

 

 

 

 


@Nichola L wrote:

I have legitimately  employed various people to work on my house and in my garden who are declared as autoentrepreneurs. I do not pay VAT, as they are not allowed to charge me VAT.


Upwork clearly does not qualify for the status of "autoentreprenueur" hence has to charge you VAT which is passed on to the French government.

 

 

 

Community Leader
Teri S Member Since: Oct 17, 2011
7 of 26

@Nichola L wrote:

Petra, I did not say that I as a consumer do not pay VAT in France - of course I do. So if I go to a restaurant I pay VAT. The restaurateur charges me VAT. The restaurateur pays that amount to the government.

 

However, as a consumer, I have legitimately  employed various people to work on my house and in my garden who are declared as autoentrepreneurs. I do not pay VAT, as they are not allowed to charge me VAT.

 

I can only speak for the way I am declared in France. But  there is a grey area in that there is a  difference between Upwork and the restaurateur:  on Upwork I am not only a consumer, I am also a provider. It is true that I pay Upwork a fee to introduce me to a client. But the services Upwork provides, covers the end consumer, the client, more than it covers me, the provider. 


The VAT that Upwork is charging freelancers applies only to the fees that the freelancers pay to Upwork for use of the platform. It has nothing to do with the services you sell to your clients. You pay the VAT to Upwork as a consumer of their services, they then pay it in to your tax authorities.

 

That Upwork charges their fees to freelancers and not clients is their business decision. You may not agree with it, but legally, we freelancers are the only ones who pay the fees and all the benefits to the clients are free to the clients. Unfair, maybe, but that's a completely different issue.

Community Guru
Nichola L Member Since: Mar 13, 2015
8 of 26

Teri, I am aware of all the points you have made. However, as an autoentrepreneur, I do not charge VAT (I am not allowed to) and therefore, I do not pay VAT to the French government. So I am obliged to swallow Upwork's taxation system without having any recourse to reimbursement from the French government. I will have to cost this in to my charges, and I feel this creates an unlevel playing field.

Community Leader
Teri S Member Since: Oct 17, 2011
9 of 26

@Nichola L wrote:

Teri, I am aware of all the points you have made. However, as an autoentrepreneur, I do not charge VAT (I am not allowed to) and therefore, I do not pay VAT to the French government. So I am obliged to swallow Upwork's taxation system without having any recourse to reimbursement from the French government. I will have to cost this in to my charges, and I feel this creates an unlevel playing field.


The playing field was never level. Those of us who are required to charge VAT have to charge higher rates than you, who doesn't have to charge VAT. In my case, VAT is 25%, so my rates would have to be 25% higher than yours in order to give me the same return on my work (if both you and I were selling to a private person in France, for example).

 

In your case, you need to increase your prices about 2% in order to get the same return after fees and taxes. I think the playing field is still leaning more in your favour rather than mine.

 

When it comes to the fees that we pay. Yes, I only need to pay 10% and you will need to pay about 12%, but you can deduct the full 12% from your earnings as a business expense, which will reduce your income taxes (marginally). So your earnings will be reduced slightly if you don't raise your rates, but the income tax you pay will also be reduced, so the net result should be about the same.

 

Community Guru
Nichola L Member Since: Mar 13, 2015
10 of 26

Teri I may not charge/pay VAT, but I am taxed over 23% on everything I earn which has to be paid every three months. So adding that extra 2% on the service charge actually does count. Autoentrepreneurs in France only pay further tax if their gross earnings exceed a quite high ceiling.

 

Autoentrepreneurs do not benefit from business expenses.

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