The UK government is considering extending VAT responsibility across online marketplaces. Under the proposal, platforms could be required to collect and pay VAT on sales made by UK businesses through their websites or apps.
The aim is to reduce tax non-compliance and create a level playing field. The proposal is not law yet. On 23 June 2026, HMRC and HM Treasury launched a consultation, which closes on 18 August 2026.
Why Marketplace VAT Is Back in Focus
Since 2021, marketplaces have been responsible for VAT on certain sales involving overseas sellers. The government says those measures have raised more than £8 billion and continue to generate around £1.8 billion each year.
The same rules do not cover most sales made by UK-based businesses. HMRC estimates that tens of thousands of businesses may not be complying with their VAT obligations, with the potential to cost the Exchequer hundreds of millions of pounds each year.
Moreover, marketplace VAT is a large-volume compliance concern for eCommerce businesses as online sales now represent 28% of UK retail sales in 2025.
Who May Be Affected
The proposals mainly concern UK businesses selling goods to consumers through online marketplaces. This could include online retailers, restaurants and takeaway businesses.
VAT-registered sellers and some businesses below the registration threshold may both be affected. Private individuals occasionally selling unwanted belongings would remain outside the proposals.
The government is considering how the rules should apply to second-hand sellers using the VAT Margin Scheme. One option is a Minimum Platform Threshold, where marketplace responsibility would begin only after sales passed a set amount.
The Risk of Ignoring VAT Compliance
Businesses must not delay the consultation’s implementation until it becomes law, as existing VAT obligations remain in force. Similarly, an unpaid tax assessment, interest and penalties could be imposed on a business if it does not register where it should, fails to report taxable sales, or files inaccurate VAT returns. The implications can be more serious if HMRC think that the error was intentional.
Poor bookkeeping can create differences between marketplace reports, bank receipts, accounting software and VAT returns. These gaps may be difficult to explain during an HMRC review.
Even if platforms later become responsible for VAT on some transactions, sellers may still need to account for VAT on sales through their own websites or shops.
What Online Sellers Should Do Now
Online sellers should review total taxable turnover across the whole business rather than checking each marketplace separately. Sales through marketplaces, websites and shops may all need to be considered together when deciding whether VAT registration is required.
Businesses should also check the VAT treatment of products, delivery charges, refunds and platform fees. Personal sales should not be mixed with business sales, and second-hand traders should maintain good records.
This does not mean that businesses should alter their VAT accounting because of the open consultation. But it’s never too late to look back on the record and catch errors before it gets harder to enforce.
How Lanop Helps E-Commerce Businesses Stay VAT-Compliant
Lanop can help online businesses review their VAT registration position, reconcile marketplace reports and identify missing or incorrectly recorded sales.
Its team can also support VAT return preparation, error correction, bookkeeping reviews and ongoing compliance across multiple platforms and direct sales channels.
For online sellers, this proposal is a reminder that VAT records must be accurate, complete and ready to support the figures reported to HMRC.
