Marketplace VAT: what the plan to make Amazon and eBay collect VAT could mean for UK sellers

If you sell goods to consumers through Amazon, eBay, Etsy or a food delivery app, a government consultation this summer is worth ten minutes of your time. HMRC and HM Treasury have proposed that online marketplaces, rather than the sellers themselves, should account for VAT on many sales made by UK businesses. Nothing has changed yet, but it is the kind of proposal that can arrive with limited notice once it is legislated.

What has actually been proposed

The consultation opened on 23 June 2026 and closed on 18 August 2026. It is titled "Extending online marketplace liability to combat non-compliance" and sits on GOV.UK. The idea is to extend the "deemed supplier" rules that have applied since 2021. At the moment those rules make marketplaces responsible for VAT on goods sold by overseas sellers when the goods are already in the UK, and on certain low value imports. Sales by UK established sellers sit outside them.

The proposal would bring UK businesses in, for business to consumer sales of goods that are in the UK at the point of sale. The marketplace would account for the VAT directly to HMRC. The sale from the seller to the marketplace would be treated as zero rated, and the marketplace would then be treated as the supplier to the customer.

The consultation says "tens of thousands" of UK businesses selling through marketplaces are not meeting their VAT obligations, costing "hundreds of millions of pounds a year". It singles out delivered hot food, which means restaurants and takeaways using delivery platforms, as a sector with a particular problem. It also says the extra revenue from better compliance will fund improvements to the business rates system for pubs, restaurants, hotels and other high street businesses.

Who would and would not be affected

The proposal targets businesses, not individuals. Private sellers clearing out their own belongings are excluded. Sales to other businesses are also outside the scope, because the focus is on consumer sales.

The government has put forward two ways of protecting very small businesses:

• A minimum platform threshold. The lead proposal is £90,000, matching the current VAT registration threshold. It would apply per platform, and a lower figure is also being considered to catch more non-compliance.
• VAT rate relief. A form of relief for businesses below the registration threshold, though the consultation notes risks of abuse.

Commentators have pointed out that a per platform threshold could encourage sellers to split sales across several accounts, which is a risk the government will need to address. Law firm Simmons & Simmons also notes that a lower threshold would catch more non-compliance but affect more micro businesses.

What could change in your day to day

If you are VAT registered and sell through a marketplace, the practical effects would probably be these, based on the consultation and legal commentary:

• Cashflow. Today you hold the VAT you collect until your return is due. If the marketplace takes it at the point of sale, that short term cash cushion disappears. Commentators describe this as an adverse cashflow impact.
• Bookkeeping. Marketplace sales would be treated differently from sales on your own website or in person. You would need to keep them separate in your accounts.
• Input VAT. You would still reclaim VAT on stock, postage and platform fees, and you would still file returns. Those responsibilities stay with you.
• Flat Rate Scheme. HMRC's existing guidance already says that marketplace sales where the marketplace is liable for the VAT are not included in the Flat Rate Scheme calculation. Businesses on that scheme could face complications if more of their sales fall under the new rules, and the consultation asks specific questions about it.
• Small sellers below the threshold. Some might find it makes sense to register voluntarily so they can recover VAT on their costs, depending on how the final rules are drawn up.

Platforms would have their own work to do. They would need to check where a seller is established, assess turnover, work out whether a sale is a business sale, and separate new goods from second hand ones. For food delivery apps, which mostly host UK businesses, the consultation says the adjustment would be more significant than for general marketplaces.

What we do not know yet

There is no start date. After the closing date, the government will review responses and publish its own reply, which may be followed by a consultation on the technical legislation. Commentators expect any start date to be tied to a future Budget or fiscal event. The details above are proposals, not rules, and the threshold, the treatment of second hand goods and the position of Flat Rate Scheme users could all move.

For context, the existing marketplace rules are estimated in the consultation to have raised over £8 billion cumulatively, with ongoing revenue of around £1.8 billion a year. That helps explain why the government is looking at extending them rather than dropping the idea.

What to do this week

• Know your numbers. Work out your total sales through each marketplace over the last 12 months, and how far each sits from £90,000.
• Split your records. Make sure your accounting software can report marketplace sales separately from direct sales. If you export orders by hand, tidy that up now.
• Stress test your cashflow. If the VAT on marketplace sales left your hands immediately, would you still cover your own bills? It is better to ask that question before a start date exists.
• Look at your pricing. Check whether your prices on each channel are VAT inclusive, and whether your margins on marketplaces would hold up under different assumptions.
• Talk to your accountant. Particularly if you use the Flat Rate Scheme or sit near the VAT threshold.
• Watch for the government response. It will be published on GOV.UK, and it is the point at which the proposals become firmer.

Why your own channel matters

None of this applies to sales you make through your own website, where you remain the seller and VAT works as it does today. Many small businesses already use marketplaces for reach and their own shop for repeat customers, and a change like this is a reminder to keep that balance sensible. If you take food orders, our takeaway commission calculator shows what platform fees cost you, and if you are weighing up selling direct, our ecommerce work covers building a shop that handles VAT, payments and order records cleanly.

This article is general information, not tax advice. Because the proposals are still in flux, check GOV.UK and speak to an accountant before making decisions based on them.