HMRC and HM Treasury want online marketplaces, rather than the sellers trading on them, to collect and pay the VAT on domestic UK sales. The proposal would cover UK businesses selling goods to consumers through online marketplaces, along with restaurants and takeaways trading through food delivery platforms. The consultation ran for eight weeks, opening on 23 June 2026 and closed on 18 August 2026, and responses are now with a joint HMRC and Treasury policy team. No rules have changed, and none will change without a further consultation on draft legislation.
This guide sets out what has been proposed, which sellers would be affected, and what it would mean for cashflow, VAT accounting and daily operations.
What HMRC Has Proposed
Under the proposal, when a UK business sells goods to a consumer through an online marketplace, and those goods are in the UK at the point of sale, the marketplace would become responsible for accounting for the VAT instead of the seller.
The mechanics are simple enough once written down. The supply from the seller to the marketplace would be treated as zero-rated. The marketplace would then charge VAT at the applicable rate on the sale to the consumer and account for that VAT on its own return.
Plenty would stay as it is. VAT rates and the liability of the goods themselves are untouched by the proposal, so anything zero-rated today would remain zero-rated. Sellers would carry on recovering input tax on stock and costs exactly as they do now. Sales through a seller’s own website or a physical shop fall outside the proposal, as do business to business transactions, because the existing marketplace rules apply to business to consumer sales only.
What would change
- The marketplace, not the seller, accounts for VAT on qualifying sales of goods to consumers
- The supply between seller and marketplace becomes a zero-rated deemed supply
- Marketplaces take on more checks on the businesses selling through them
What would stay the same
- VAT rates and the liability of individual products
- Input tax recovery on stock and business costs
- VAT treatment of direct sales through your own site or shop
- Business to business sales
- The obligation to register for VAT once total turnover crosses the registration threshold
Why HMRC Is Doing This
The proposal builds on rules already running. In 2021, marketplaces became liable for VAT on low value imports valued at £135 or less, and on goods already in the UK at the point of sale by an overseas business. HMRC estimates those reforms have raised more than £8 billion to date, and continue to raise roughly £1.8 billion a year alongside the removal of low value consignment relief.
The remaining gap, as the government sees it, is with domestic sellers. HMRC estimates that tens of thousands of UK-based businesses trading through marketplaces are not meeting their VAT obligations, at a possible cost to the Exchequer of hundreds of millions of pounds a year.
The consultation sets out three patterns of evasion:
- Overseas businesses presenting themselves as UK-established, so marketplaces apply the wrong VAT treatment to their sales
- UK businesses spreading sales across several marketplaces and channels, known as disaggregation, to appear to fall below the VAT registration threshold
- Businesses registering for VAT and reclaiming input tax, then either accounting for less VAT than they owe or dissolving the company before paying anything over
Scale forms part of the argument, with Office for National Statistics figures quoted in the consultation showing internet sales rising from 5% of total retail sales in 2008 to 28% in 2025.
The proposal also carries an explicit high street dimension. Dan Tomlinson MP, Exchequer Secretary to the Treasury, has committed that any revenue raised through these reforms would be put into improvements to the business rates system for pubs, restaurants, hotels and other high street businesses.
The Two Options for Smaller Sellers
The government has said it wants to protect businesses that are not required to register for VAT. Two options are on the table, and HMRC has invited alternative suggestions as well, so the final design remains open.
A Minimum Platform Threshold
The lead proposal is a minimum platform threshold, or MPT. Marketplaces would only be liable to account for VAT where a UK business’s total sales on that individual platform exceed a set value. HMRC’s lead figure is £90,000, matching the current VAT registration threshold, applied per platform rather than across a business as a whole.
One point deserves spelling out, because it’s easy to misread. A minimum platform threshold would not replace or remove the normal obligation to register for VAT once total turnover meets the registration threshold, so the two would run alongside each other.
HMRC has also asked for views on setting the threshold lower than £90,000, while stating clearly that this is not its lead proposal. A lower figure would catch more non-compliance, particularly businesses splitting sales across multiple accounts on the same platform, and would raise more money for the business rates changes.
VAT Rate Relief Below the Registration Threshold
The alternative is a form of VAT rate relief, available only to UK businesses trading below the VAT registration threshold. It would help offset the effect of a marketplace applying VAT to the sales of a small seller who doesn’t want to register voluntarily.
HMRC has flagged its own reservation about this route. Relief tied to being UK-based may not address the risk of overseas businesses posing as UK-established to gain the advantage, and could open further avenues for non-compliance.
What This Would Mean Day to Day
Cashflow
VAT-registered sellers currently hold the VAT they collect on marketplace sales until their return falls due. Under the proposal, the marketplace would collect it at the point of sale instead. HMRC has asked businesses directly to quantify what that would do to their cash position, which suggests the department knows it’s the sharpest end of the change.
Repayment positions
Sellers who make most of their sales through marketplaces could find themselves regularly in a net repayment position with HMRC. They would still be reclaiming input tax on stock, packaging, fulfilment and other costs, with far less output tax to set it against.
Flat Rate Scheme users
Businesses trading under £150,000 that use the VAT Flat Rate Scheme could be affected, and HMRC has asked what losing access to the scheme would mean for them.
Channel mix
Sellers running both marketplace and direct sales would be operating two different VAT treatments side by side, with implications for bookkeeping, reporting and reconciliation between platform statements and VAT returns. Anyone trading across multiple sales channels will want order data separated cleanly by channel before any of this takes effect.
Second-hand goods
No decision has been made on this one yet. Marketplaces cannot currently use the Second-hand Margin Scheme, so applying the rules unchanged would mean VAT charged on the full sale price rather than on the margin, which would squeeze pricing and margins for anyone trading in used stock. The government is weighing whether to exclude business sales of second-hand goods from the rules altogether, or to remove margin scheme access for marketplace sales.
Sales that are not affected
Private individuals selling unwanted or second-hand items are outside the scope of the proposal and would see no change at all.
For anyone already dealing with cross-border obligations, the pattern will look familiar. The direction of travel across both UK and EU regulation is that platforms and partners absorb more of the compliance work, as the ending of de minimis relief has shown on the customs side. Sellers moving goods to Northern Ireland have watched the same thing happen through the Windsor Framework and UKIMS, where responsibility for the data behind each movement now falls to authorised traders and carriers.
What Sellers Can Do Now
Nothing here is urgent, since no change takes effect until legislation is drafted and passed. It’s a sensible moment, though, to understand your own exposure rather than waiting for the outcome.
- Work out what share of turnover runs through marketplaces against direct channels, broken down platform by platform
- Model your cash position on the assumption that VAT is collected at the platform rather than held by you until your return is due
- Check whether sales on any single platform are approaching the £90,000 mark, since the per-platform basis matters more than total turnover for this proposal
- Ask your accountant what the alternative looks like if you use the Flat Rate Scheme
- Watch this closely if you sell second-hand goods as a business, because it is the least settled part of the proposal
- Check that the seller, establishment and product data each marketplace holds for you is accurate, since platforms would need to run more checks on where a business is established, its turnover, whether a sale is made in the course of business, and whether goods are new or second-hand
What determines whether these rules would apply is where your stock physically is at the point of sale, rather than where your business is registered. Sellers using a UK fulfilment partner alongside overseas stock holdings should be clear on which orders ship from where, a distinction that also drives the £135 rules for goods sold from outside the UK.
What Happens Next
The consultation closed on 18 August 2026. HMRC and HM Treasury will publish a summary of responses setting out next steps, in the usual way. Should the government decide to proceed, HMRC would then publish a technical consultation on draft legislation, which means there is a further round of detail and a further opportunity to comment before anything binds.
The UK would not be the first to go down this road. Similar domestic marketplace liability rules already operate in Switzerland for goods and in New Zealand for certain services, and the consultation points to both as precedents.
Any seller with a strong view on the design, particularly on the threshold figure or the treatment of second-hand goods, will get another chance to make it at the technical stage.
The common thread running through marketplace VAT, product safety compliance and customs data is that the administrative load is moving away from individual sellers and towards the platforms and partners handling their goods. Green Fulfilment sees the same pattern across the UK and EU brands it works with, where the practical question is usually less about the rule itself and more about whether stock records, paperwork and product data are organised well enough to cope when it arrives. Brands that have that groundwork in place tend to absorb regulatory change with much less disruption than those scrambling to assemble it after the fact.
Frequently Asked Questions
Are the new UK online marketplace VAT rules in force?
No. These are proposals rather than law. The consultation closed on 18 August 2026, and any change would need a further consultation on draft legislation before taking effect.
Who would be affected by the proposed online marketplace VAT rules?
UK-based businesses selling goods to consumers through online marketplaces, where those goods are in the UK at the point of sale. Private individuals selling unwanted or second-hand items are not in scope.
Would I still need to register for VAT?
Yes, on the same basis as now. The VAT registration threshold would still apply to your total turnover. A minimum platform threshold, if adopted, would not remove that obligation.
What is the deemed supplier rule?
It is an arrangement where the online marketplace, rather than the seller, is treated as responsible for accounting for the VAT on a sale it facilitates. The supply between the seller and the marketplace is treated as zero-rated, and the marketplace accounts for the VAT charged to the consumer.
Does this affect sales through my own website?
No. The proposal covers sales facilitated by online marketplaces. Direct sales through your own website or a physical shop would carry on being accounted for by you, exactly as they are now.
