Extending online marketplace liability factsheet
Published 23 June 2026
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What is this about?
HM Revenue and Customs (HMRC) estimates that there are tens of thousands of businesses trading through online marketplaces (OMP) based in the UK that are not fulfilling their VAT obligations. This non-compliance could total £100s of millions.
What is changing and why
In 2021, the government introduced reforms to strengthen VAT compliance in the online marketplace sector by making online marketplaces liable for VAT on certain sales facilitated by overseas sellers. These reforms have improved compliance and helped tackle VAT losses arising from overseas businesses selling to UK consumers.
While the reforms have been successful at collecting more VAT on sales by overseas businesses on OMPs, they had only a limited impact on overall VAT non-compliance on online platforms as they did not capture domestic businesses. The government wants to tackle this non-compliance which undermines honest businesses that pay what they owe and costs hundreds of millions in lost VAT each year.
Who may be affected
It is not right that businesses who don’t pay what they owe are able to undercut the prices of tax compliant businesses, both online and on the high street, so the government is looking to tighten online marketplace liability rules to help level the playing field.
How the policy is intended to work
Non-compliance can distort competition and place compliant businesses, both online and on the high street, at a disadvantage:
- the government is consulting on how to build on the success of earlier reforms and extend online marketplace liability so that marketplaces would be responsible for accounting for VAT on sales they facilitate on behalf of UK businesses
- to minimise the impacts of the policy on businesses not required to register for VAT the government is consulting on two options, and inviting alternative suggestions that meet the objectives set out above. These options include making online marketplaces liable only where per platform sales by UK businesses are above a specified value (referred to as a Minimum Platform Threshold) or making a VAT rate relief available to UK businesses below the VAT registration threshold
- sales made by those not in business, including individuals selling second-hand goods, will not be in scope of the rules and will see no change. The government is also considering how the policy could apply to sales of second-hand goods by UK businesses, including the option of making such sales outside the scope of the rules
Next steps
The consultation asks for input from individuals, businesses, representative bodies and other stakeholders whether this proposal:
- would be effective in addressing non-compliance
- is a fair and proportionate approach