Fiverr Forum

Recording Fiverr Income in LTD Company (UK)

Hi everyone,

Question for my fellow UK freelancers here I think…

I’ve done some searching and found a few topics regarding this, but nothing that really answered my question… figured I’d ask here.

I have a LTD Company setup for some contracting work I was doing earlier this year. Long story short, I registered for VAT at my accountant’s recommendation because the contract would have been greater than the VAT threshold, but unfortunately the demise of the company I was consulting for meant the contract was cut drastically short. Since then, we’ve been doubling down on freelance income, and mine (Tom) has become substantial enough that I’m now looking to live off of freelancing (here and on a handful of other sites).

I want to record the income through my LTD company, but as I’m now VAT registered, in theory, I should be adding 20% to all ‘invoices’. I’m aware that I can’t do this with Fiverr income (or any of the other freelancing platforms we operate on), and was wondering if any other UK based freelancers had experience of putting their freelance money through a LTD company? I actually dug out an invoice from last year when we made a purchase, and can see that Fiverr LTD is the one that has the relationship with the buyer… so does our income then count as ‘commission’? Does anyone know if it’s VAT Exempt or Out of Scope?

I am of course also talking to my accountant about this, but find that they’re all woefully uninformed when it comes to this modern way of working, which is why I figured I’d ask you lovely people here to see if anyone else could give some advice?

Thanks in advance.

Tom, Cubitt Audio

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Firstly, are you earning over £85K? - That’s the UK VAT threshold. If not, I’d leave worrying about VAT completely until you are. Secondly, where are the majority of your clients coming from? If they are outside of the UK/EU, you don’t need to apply VAT at all. It could even be worth your while waiting until Brexit in October, as then you will only have to apply VAT to UK orders.

If the majority of your clients are UK-based and your earnings from them take you over the VAT threshold, that’s when you will have to worry about VAT. Sadly, I’m not sure how that works with Fiverr. Your best option might be to set up a company in the EU rather than the UK and (I presume in the case of English language voice overs) avoid paying VAT altogether.

(Providing Britain leaves the EU and you only serve clients based in other countries out of the EU.)

Honestly, you need to run from most accountants and tax advisors. The last one I used made my life a misery by telling me that I should be paying VAT. Most can’t even tell you when tax applies at all. i.e. Is it at the point of purchase or the point at which money enters your bank from overseas? In my case, it’s when it enters my bank. However, I had to explain that to my tax advisor.

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I don’t believe you’d have to drill down as to where you buyers come from for UK tax, as Fiverr is the person paying.

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Thanks for replying.

The original contract I took on in March was a one-year contract, that would have taken me over the VAT threshold. Hence my accountant telling me to register immediately for VAT. I was in the contract about 3 months in the end before the business folded. So I’m now VAT registered, with an income that was substantially lower than the VAT threshold. Worst of both worlds.

In terms of location of clients, I was under the impression that technically my ‘client’ is Fiverr… This is certainly how it appears in invoices. As we don’t get financial information of the end clients, only usernames. So my ‘invoices’ would be to Fiverr LTD, a company based in Israel, who (I’m assuming) would handle any necessary VAT requirements with the end user. I could be wrong about this though.

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Fiverr isn’t the client though. Even if it is, Fiverr is VAT registered in Tel-Aviv, this would mean that UK VAT wouldn’t apply at all, as you are not selling a service to a UK/EU company. (At least, this is my take on the matter.)

.

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So this may be the answer to my question… I’m invoicing a company based outside of the UK/EU area, which would then negate the need to add VAT. Interesting. I wonder if this would be considered ‘Out of Scope’ for accounting purposes.

How this would apply to some of the other freelance sites I use (at least one of which is DEFINITELY UK-based, but still operates the same ‘we bill the customer and pay you a commission’ model) I have no idea.

I can now see why everyone told me VAT would be an almighty headache.

Thanks both @cyaxrex and @personalletters for your responses, very helpful :slightly_smiling_face:

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This is what I would argue. However, my plan for when I need to pay VAT is to just go full digital nomad and knock tax on the head altogether.

With your company, couldn’t you just scupper it now you don’t need it anymore and/or revoke your voluntary VAT declaration?

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Fiverr is the person paying the money, not our customers.

So it’s unlikely VAT would ever need to be applied for UK tax purposes.

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Not a bad idea.

I absolutely could, and I’ve considered this. But it may actually be more cost-effective if I can continue using the company and putting Fiverr money through that. Just trying to work out my options at present.

Interestingly, I literally just found this, which might be of interest to any other UK freelancers…

Most relevant part quoted below;

Digital portals, platforms, gateways and marketplaces

If you supply e-services to consumers through an internet portal, gateway or marketplace, you need to determine whether you’re making the supply to the consumer, or to the platform operator.

The platform operator is supplying the consumer if the platform operator identified you as the seller but, sets the general terms and conditions, authorises payment or handles delivery or download of the digital service. Then the platform operator would be responsible for accounting for the VAT payment that’s charged to the consumer.

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Taxes

  • Buyers may be charged with indirect taxes (such as Sales Tax, VAT or GST) depending on their residency, location and any applicable law, in addition to the Gig price shown on the Gig page.
  • Buyers agree that they are responsible to comply with all tax requirements applicable to them, including but not limited to any obligation to deduct or withhold taxes. It is hereby clarified that all prices and fees that appear on the Site are the net amounts that will be paid following any direct or indirect taxes, levy, withholding tax and/or deductions.

The above is from the Terms of Service at the bottom of the Fiverr main page.

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That has nothing to do with the seller though.

Nobody is buying anything from a seller - they’re buying it from Fiverr.

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