Extending VAT online marketplace liability
Published 28 October 2026
© Crown copyright 2026
This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3 or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: psi@nationalarchives.gov.uk.
Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned.
This publication is available at https://www.gov.uk/government/publications/vat-online-marketplace-liability-extension/extending-vat-online-marketplace-liability
Who is likely to be affected
Online marketplaces and businesses that sell goods to consumers through an online marketplace.
General description of the measure
VAT online marketplace liability rules will be extended to UK businesses where the goods are in the UK at the point of sale and sold to a consumer. Online marketplaces will be responsible for collecting VAT on sales by UK VAT registered businesses, and any other UK business with a minimum annual sales threshold per platform of £90,000. The rules will not apply to non-business (for example, personal) sales, second-hand goods, or business-to-business transactions.
Policy objective
The objective of this policy is to prevent non-compliance by businesses who fail to account for VAT on their sales.
Background to the measure
The current online marketplace liability rules were introduced in January 2021 to tackle non-compliance from overseas sellers. These rules require online marketplaces to account for VAT where they facilitate sales:
- by overseas businesses to UK consumers of goods of any value located in the UK at the point of sale
- of goods which are imported in consignments valued at £135 or less
While the introduction of these rules was a significant success, compliance challenges remain. Some overseas businesses misrepresent where they are established to online marketplaces to evade the rules, and some UK based businesses fail to register for VAT or under-declare their VAT liabilities.
Given these risks, in June 2026 the government published a consultation on extending VAT online marketplace liability to UK businesses. A consultation response document has been published.
Detailed proposal
Operative date
The government intends that this measure will be implemented from October 2027.
Current law
Current law is included in sections 5A, 5B, 7(5A), 7(5B), 7AA, 37(A1), 77E, 77F and 95A of the Value Added Tax Act 1994 (VATA), along with Group 21 of Schedule 8 and Schedule 9ZC.
Proposed revisions
The legislation will extend an online marketplace’s liability to account for VAT to include where that marketplace facilitates the sale of goods by a UK established business, and the goods are in the UK at the time of sale. This measure will apply where either the seller is registered for VAT, or where the seller’s sales on the online marketplace in question are above a specified threshold.
Secondary legislation will be made in due course that will make provision for the level of the threshold, how the threshold will operate, the treatment of second-hand goods, the planned date of implementation, and other details.
Summary of impacts
Exchequer impact (£ million)
| 2026 to 2027 | 2027 to 2028 | 2028 to 2029 | 2029 to 2030 | 2030 to 2031 | 2031 to 2032 |
|---|---|---|---|---|---|
| — | +165 | +320 | +270 | +250 | +265 |
These figures are set out in Table 6.1 of Budget 2026 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Budget 2026.
Economic impact
This measure is not expected to have significant macroeconomic impacts.
Impact on individuals, households and families
There are no increases to VAT liabilities as a result of this measure. However, some individuals may be impacted where this measure results in previously non-compliant businesses on online marketplaces having VAT applied to their sales. This may result in an increase in price if the VAT charge is passed on by the supplier to the end user.
This measure is not expected to impact on family formation, stability or breakdown.
This measure is expected overall to have no impact on individuals’ experience of dealing with HMRC since it does not change any tax administration obligation.
Equalities impact
This measure may apply to individuals regardless of their protected characteristics. HMRC does not hold data that it can use to assess whether there are any disproportionate impacts to protected groups.
Administrative impact on business including civil society organisations
This measure is expected to have a significant impact on approximately 100,000 businesses, as the VAT that businesses on online marketplaces owe will now be collected by the online marketplaces rather than by the businesses themselves. Per-business, greater one-off and continuing costs are expected to fall on online marketplaces than on the businesses selling on the online marketplaces.
One-off costs for online marketplaces could include familiarisation with guidance, software updates to ensure compliance with new rules, ensuring sellers on their platform are prepared for the new rules and reviewing existing listings to decide the correct VAT treatment. One-off costs for businesses selling on online marketplaces include familiarisation with guidance, software updates to ensure compliance with new rules, reviewing existing listings to check what is in scope for the new rules, arranging alternative cash flow solutions and updating arrangements with online marketplaces. Total one-off costs for online marketplaces and businesses selling on online marketplaces are estimated to be £40 million.
Continuing costs for online marketplaces could include monitoring sellers and listings, resolving seller disputes, seller compliance checks and collecting and remitting VAT on sales in-scope. Continuing costs for businesses selling on online marketplaces include providing additional evidence to online marketplaces, verifying VAT treatment of listings and monitoring new cash flow solutions. Some businesses may be brought into a repayment position and face additional compliance costs. Continuing savings for businesses may come from administration simplifications gained as marketplaces will be accounting for VAT on their behalf. Net continuing costs for online marketplaces and businesses selling on online marketplaces are estimated to be £8 million per annum.
Estimated one-off impact on transitional businesses costs (£ million)
| One-off impact | (£ million) |
|---|---|
| Costs | 40 |
| Savings | — |
Estimated continuing impact on administrative burden (£ million)
| Continuing average annual impact | (£ million) |
|---|---|
| Costs | 10 |
| Savings | 2 |
| Net impact on annual administrative burden | 8 |
This measure is not expected to impact civil society organisations.
Operational impact (£ million) (HMRC or other)
HMRC will incur extra staff costs implementing this change, currently estimated at £5.7 million over 5 years.
Other impacts
Other impacts have been considered, and none have been identified.
Monitoring and evaluation
Consideration will be given to monitoring and evaluating aspects of the operation of the online marketplace liability rules and associated VAT compliance outcomes after sufficient data has been analysed and collected.
Further advice
If you have any questions about this change, contact Nicholas Price or Edward Brett by telephone on 03000 585658 or 03000 516803, or by email at nicholas.price@hmrc.gov.uk or edward.brett@hmrc.gov.uk.