UK: Consultation on marketplaces to charge VAT on UK transactions

Who this will interest: UK businesses selling via marketplaces;

Key point(s): The UK Government has launched a consultation on how it plans to extend the requirement to account for VAT on sales via marketplaces to their operators. There are two proposed options, each one with specific challenges for taxpayers.

Essentia’s take: The consultation provides valuable information on HMRC’s intentions concerning marketplace liability and future plans.

Action points: Businesses impacted by this decision should reach out to HMRC and express their point of view on the proposed measures.

In detail

A new consultation has been published by the UK authorities concerning the VAT rules for online marketplaces.

Currently, the VAT rules state that online marketplaces are liable for charging and collecting UK VAT on sales made to consumer clients if:

• they facilitate the sales of low value imports valued at £135 or less
• the goods are in the UK at the point of sale by the overseas business

However, the UK Tax Authorities (HMRC) believe there are tens of thousands of businesses selling via marketplaces that are still not compliant. Many of them seem to be established in the UK rather than abroad.

The consultation provides details on how these companies evade tax and lead to significant losses in VAT.

HMRC is therefore opening a consultation on the possibility of shifting more of the requirement to account for VAT from the sellers to the marketplace operators for domestic sales, not just those mentioned above. They are asking for views on two potential options for making the online marketplace liable for VAT on sales by a UK business:

• Option 1 – all sales by a UK business facilitated by the marketplace above a specified value (referred to as a Minimum Platform Threshold) will be subject to VAT or
• Option 2: Making the online marketplace liable for VAT on sales by a UK business but making a VAT rate relief available to UK businesses below the VAT registration threshold

For Option 1 the proposed level for the Minimum Platform Thresh is £90,000. However, the government acknowledges that £90,000 is a high amount and non-compliant businesses may create different accounts for the same business and trade below this threshold. A significant amount of tax will continue to be lost if a high threshold is used. Therefore HMRC is also considering a lower threshold and is looking for views on this option.

With regards to Option 2, HMRC proposes a VAT rate relief for businesses that are trading under the VAT registration threshold. However, the consultation acknowledges many foreign businesses set up companies in the UK in order to avoid registering and the relief would not help tackle this issue. No further details have been provided on this option.

While some platforms are already applying these rules in relation to foreign sales, others are not and will need to manage this obligation for the first time (e.g. food delivery platforms). The current proposal only deals with the sale of goods, leaving out platforms that provide services (e.g. Uber).

The consultation is open until 18 August 2026 and answers can be provided online, via email or post. For details please see the consultation page.