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Online Marketplaces Will Collect VAT From October 2027: What Sellers Need to Know
VAT
3K Financial & Accounting Services Ltd | Keeping Klient Knowledgeable
Confirmed at the Budget, new rules will make platforms such as Amazon, eBay and Facebook Marketplace responsible for collecting VAT on many UK sellers’ sales. Here is what is known so far and how to prepare.
A major change to VAT has been confirmed at the Budget. To tackle VAT fraud and evasion, online marketplaces will have to account for VAT directly to HMRC on sales made by many UK businesses. Both sellers and platforms will face new costs, estimated at £48m in the early years (£40m one-off for platforms and up to £8m a year ongoing), with the aim of stopping widespread VAT non-payment.
Who will be affected?
From October 2027 (the Treasury has not confirmed a specific start date), online marketplaces will be responsible for collecting VAT on sales by:
UK VAT-registered businesses, and
any other UK business whose sales on that platform exceed a minimum annual threshold of £90,000 per platform.
The rules cover cases where the marketplace facilitates the sale of goods by a UK-established business and the goods are in the UK at the time of sale. HMRC expects a significant impact on around 100,000 businesses.
What is not covered
The Treasury stressed that the rules will not apply to personal (non-business) sales, second-hand goods or business-to-business transactions.
Why is this happening?
HMRC says some overseas businesses misrepresent where they are established to avoid the existing rules, and some UK businesses fail to register for VAT or under-declare what they owe. Making the platform responsible removes much of that opportunity. The measure is expected to raise £320m in its first full year (2028-29).
What will it cost?
Platforms: about £40m one-off for software updates, preparing sellers and reviewing listings, plus up to £8m a year for monitoring sellers, resolving disputes, compliance checks and collecting and remitting VAT.
Sellers: new costs from providing extra evidence to marketplaces, verifying the VAT treatment of listings and monitoring new cash flow arrangements.
HMRC: around £1.1m a year to operate the system.
What is still to be decided
Some details will follow in secondary legislation next year, including the annual sales threshold per platform and the implementation date. HMRC will publish detailed guidance before the rules start, including any accounting changes needed. We will update you when it arrives.
How to prepare now
List where you sell. Identify every online marketplace you use and how much you sell through each.
Check your VAT position. If you are registered, expect the rules to apply. If not, track your sales per platform against the £90,000 level.
Review your listings. Make sure the VAT treatment of your products is right and you can evidence it.
Plan for cash flow. When the platform accounts for VAT directly, the timing of payments to you may change. Work out what that means for your working capital.
Keep records tidy. Clean sales data makes it easier to reconcile your VAT returns with what the platform reports.
If you sell online, speak to us before the rules arrive. We can review your sales channels, VAT registration and cash flow so the change is a smooth one.