VAT changes for online marketplaces

From October 2027, online marketplaces will become responsible for collecting and accounting for VAT on certain sales made by UK businesses through their platforms.

The changes extend existing rules, which currently require online marketplaces to account for VAT where they facilitate sales:

• Sales by overseas businesses to UK consumers involving goods of any value located in the UK at the point of sale.
• Sales of imported goods contained in consignments valued at £135 or less.

The new rules will apply to business-to-consumer (B2C) sales by UK businesses that are VAT-registered, or whose annual sales through an individual online marketplace exceed £90,000. This threshold will apply separately to each platform used by a business. Where a business is VAT-registered, the rules will apply to all its qualifying sales through online marketplaces.

Whilst existing rules have helped, the changes are intended to tackle continued VAT non-compliance. 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.

Certain transactions will be excluded, including:

• Personal sales by individuals who are not trading as a business (e.g., individuals selling unwanted personal belongings like clothes or household items).
• Second-hand goods sold by UK businesses.
• Business-to-business (B2B) transactions.

The changes are expected to affect around 100,000 businesses. HMRC will publish further guidance ahead of implementation to help marketplaces and sellers prepare for the new rules.