What’s Wrong With The Adultwork VAT Rules – 1st October 2015

I was a bit surprised, when logging into the phone app of Adultwork this morning to see a higher deduction than normal for displaying my telephone number.  Many clients don’t realise that Adultwork charges both clients and escorts to use it’s service and to escorts it’s free of charge at the point of service but it quickly racks up to a yearly charge of £365 a year if you want to display your phone number on your profile every day.

Most escorts, like myself offer private galleries and offer cam sessions or phone sex chat to rack those credits up.  I have never paid Adultwork for any services but I do display my number every day.  I have never withdrawn my credits from the site and use a contra-payment to pay for my phone display charges.  This worked very well and I didn’t begrudge them one little bit but in recent months, as I reported on my previous blog post last week, enquiries via Adultwork have dropped dramatically, partly I think due to the scandals online about third party sites which men and women have joined to look for sex.

For seven years before I took up escorting, I trained as a public sector accountant and I still practice accountancy to this day on a freelance basis.  I am having trouble getting my head around how Adultwork are applying the EU VAT charges.  I can understand that for every £10 uploaded for 10 credits, this is now technically worth £8 because the prices of sex chat operators and models has increased by 20% overnight.  This is perfectly logical and I completely understand why they have done it.  My direct chat fee has increased overnight from 1 credit per minute (£1) to 1.20 credits as has 24 hours access to my private pictures.  Any models and phone operators wanting to charge their previous rates will have to reduce their requested fees by 20% if they wish to keep their prices at the previous level.

The thing I can’t get my head around, as an accountant, is why I am being charged £1.20 now to display my phone number.  I have not uploaded any monies to Adultwork to pay to display my phone number and it has already been subject to VAT at the point of source (booking a sex chat or looking at my pictures).  I haven’t asked for the monies to be refunded and they are the ownership of Adultwork (remember AW billed the customer for the credits).  I could understand paying 20% VAT if I had uploaded £10 this morning and wanted to use the monies for purchasing a service from Adultwork but I don’t understand how they are then re-charging the money that was uploaded by a client again when no refund to the model has occurred.  By using the internal services of Adultwork I am requesting credits, owned by them to be refunded to me in lieu of services.  The way they are vigorously applying VAT is amounting to 40p in the pound, not 20p in the pound.  The monies are being applied twice under the same VAT code.   I will put this into very simple terms

Client Uploads £10 and spends 1.20 credits to view my gallery.  1 credit is applied to my account and 0.2 credits are going to the tax man.  I then display my number the following day and am charged 1.20 credits for the pleasure now, 1 credit of my balance owed to me by Adultwork being refunded and 0.2 going to the tax man.  From that initial £10, 1 credit was used (£1) and applied twice therefore 40p in the pound is going to the tax man.  Surely that can’t be correct.  I can understand it if I uploaded the money myself but I didn’t, it’s money owed to me that VAT has already been paid on within the same tax code.

I haven’t received any credits since it was applied but I suspect I won’t be getting 1.20 credits for a sex chat, I will be getting 1 credit and then having to pay VAT on monies already held by them on a third party basis. I am not an expert on digital EU VAT, it’s not something I have ever had to deal with but I would have thought that the VAT would have been charged to the end user of the monies held within the system, so for a 1.20 credit sex chat (including VAT) that would be paid to me and I would pay the VAT on the final use of the money (to display my number) or when I withdrew the funds via a self billing system.

I may of course be completely wrong but this has already got my head spinning.  Having read the statement on the AW site, even I am completely confused by it all.  How on earth do they expect the lay person in the street to understand this and by this I mean the escorts, models, chat operators and clients.  The statement of facts from Adultwork is vague to say the least and I will be waiting in anticipation to see what credits are applied to me in the forthcoming days.  I will update the blog and re-publicise it accordingly

Steve

Twitter @stevegayescort

 

2 responses to “What’s Wrong With The Adultwork VAT Rules – 1st October 2015

  1. The situation is quite straight forwards, the EU directive on VAT (2006/112/EC) states that VAT is applicable on all service based transactions. So from an EU point of view the following are all separate transactions;

    • Client buys credits from AW to spend on site (transaction 1)
    • Client uses credits to buy service from AW service provider (transaction 2)
    • Service user uses credits to buy “display phone number” or alike (transaction3)

    So while although it may be the same “money” that is passing from AW to the client then to the Escort/Webcam provider then back to AW. There are three unique service transactions all of which are chargeable for VAT. As the “money” changes ownership 3 times in the above illustrated process.

    Now prior to January 1st 2015, VAT was not chargeable by the member states on electronic service transactions, and was instead only payable in the nation where the online company was registered for Tax purposes. So you could set up an online business outside of the EU and legally avoid having to pay any VAT on transactions made within the EU. This at the time of the writing of the 2006 directive was not considered an issue, as e-commerce at the time was only worth globally about $107bn. So VAT lost from EU transactions was tiny and as such they didn’t consider it for the purpose of VAT directive.

    Subsequently though e-commerce has become a massive thing with global sales online now being worth $1.5 trillion a year. So the EU decided that actually they were losing what can only be described as a shit load of money in VAT on these transactions. So they implemented an amendment directive to the VAT one entitled “VAT: special arrangements applicable to services supplied electronically”.

    This meant that on the 1st January 2015, all e-commerce transactions that include one or more parties that are based within the EU, are now subject to the VAT rates at the applicable level where those citizen’s reside within the EU.

    Now as the law came in to effect on the 1st January this year, it could mean that AW have for the past 6 months been paying the VAT on all of their transactions on behalf of the people selling and buying services. This would be quite expensive for them to do, so it is understandable now that they have decided to actually pass the cost back on to the users of the site, as it would have had a sizable detrimental effect on their profitability as a company.

    The directive has essentially come about because in recent years the EU has taken more pro-active steps in tackling tax avoidance and evasion by companies exploiting the tax system and the loopholes that existed. The whole e-commerce section is one of those loopholes that they have now subsequently closed down.

  2. one of the things i find interesting about all these discussions, and something that is rarely mentioned is whether or not Adultwork is in the EU or not.

    Obviously the company was originally started in uk, domain originally registered to an office in church road, hove, east sussex and i have it on good authority from an escort who lived in brighton that in its early days, people representing adultwork used to collect commissions for bookings in person.

    currently, the “owners” ubard investments are in hong kong. there is a “service address” of some description in malta or gibralatar i believe. but if adultwork are now putting their hands up to being owned . operated in EU, then shouldnt the VAT number, and they’ll have one if they are collecting monies and giving to the taxman, be shown on their website somewhere?

    all roads lead back to brighton / hove……..

Leave a Reply

Your email address will not be published. Required fields are marked *