Online Marketplace VAT Crackdown 2026: What Every UK E-commerce SME Needs to Know

By Jessica | 10 August 2026

The UK government is consulting on a major change to online marketplace VAT rules. If introduced, marketplaces could become responsible for accounting for VAT on sales made by UK-based businesses, where the goods are already in the UK when sold.

This would extend rules that currently focus mainly on certain overseas sellers. It could affect e-commerce businesses selling retail goods through online marketplaces, as well as businesses using online food delivery platforms.

The consultation is open until 11:59pm on 18 August 2026. Nothing has been enacted yet, so existing rules continue to apply. However, growing e-commerce businesses should understand the proposal now because it could affect pricing, cash flow, records and marketplace agreements.

If you need help reviewing your position, you can compare suitable VAT accountants through Accountant Search. Accounting support for limited companies and growing SMEs starts at £85pm+, depending on your requirements.

What is the online marketplace VAT crackdown?

HM Revenue & Customs and HM Treasury are consulting on extending online marketplace liability to sales made by UK businesses where goods are in the UK at the point of sale.

An online marketplace is generally a platform that allows third-party sellers to offer goods to customers and is involved in key parts of the transaction, such as:

• Setting terms and conditions for sales

• Processing or enabling customer payments

• Arranging or facilitating ordering or delivery

The government believes that tens of thousands of UK businesses trading through marketplaces may not be meeting their VAT obligations. It estimates that this non-compliance could involve hundreds of millions of pounds.

The policy aim is to reduce VAT losses and create a fairer environment for businesses that are complying with the rules.

How could the proposed rules work?

Under the proposal, the online marketplace would become responsible for accounting for VAT on certain B2C sales made by UK businesses.

In practical terms, this could mean:

1. You list and sell goods through an online marketplace.

2. The goods are located in the UK when the customer buys them.

3. The customer is a consumer rather than a VAT-registered business.

4. The marketplace accounts for the VAT on the sale, subject to the final rules and any exclusions.

This is similar to the existing deemed-supplier framework used for certain sales by overseas businesses. The key difference is that the proposed extension would bring qualifying domestic sellers within the same wider system.

The exact legal and accounting treatment has not been finalised. The consultation is asking for views on how the system should operate, including the impact on sellers and platforms.

Until legislation is passed and a start date is confirmed, you should not change your VAT processes solely because of the consultation.

Which e-commerce businesses could be affected?

The proposal is aimed at businesses rather than private individuals selling unwanted possessions.

Potentially affected businesses could include:

• Limited companies selling consumer products online

• E-commerce retailers using third-party marketplaces

• UK-based wholesalers selling directly to consumers

• Clothing, homeware and electronics businesses

• Businesses selling takeaway food through online platforms

• Growing brands using more than one marketplace

The proposal is concerned with whether a seller is genuinely operating as a business. A casual individual selling second-hand personal items would not normally be treated in the same way.

Second-hand goods sold by UK businesses are also being considered separately. The government is exploring whether some of these sales should be excluded from the extended rules.

Your business may use several sales channels, so it is important not to assume that one marketplace’s treatment automatically applies to your website, retail premises or other platforms.

What is the proposed minimum platform threshold?

One of the main concerns is the effect on very small businesses that are below the VAT registration threshold.

The government is considering a Minimum Platform Threshold, or MPT. Under this approach, a marketplace would only become liable for VAT on a UK business’s sales after that business exceeded a specified annual sales level on that particular platform.

The consultation material discusses a possible threshold of £90,000 per platform, although the design remains subject to consultation and could change. It is not a new VAT registration threshold and should not be treated as one.

The important point is that the threshold may be measured separately for each platform. A business selling £60,000 through one marketplace and £50,000 through another might need to consider how the final rules would apply to each channel.

The government is also considering VAT rate relief for businesses below the normal VAT registration threshold. This could be used instead of, or alongside, a platform threshold.

Until the final position is confirmed, keep monitoring:

• Sales by marketplace

• Sales through your own website

• Sales through social commerce channels

• UK and overseas customer transactions

• B2C and B2B sales

• Standard-rated, reduced-rated and zero-rated goods

A business accountant in the UK with e-commerce experience can help you build reporting that separates these categories properly.

What does this mean for VAT-registered businesses?

If the proposal becomes law, the marketplace may collect and account for VAT on qualifying consumer sales. That could change the way your sales appear in marketplace reports and accounting software.

You may need to review:

• Whether marketplace statements show gross or net sales

• How VAT is identified on platform reports

• How sales are imported into your bookkeeping system

• How refunds, returns and discounts are treated

• Whether marketplace fees include VAT

• How sales are reconciled with bank receipts

• Whether the flat rate scheme remains appropriate

Businesses should be careful not to assume that VAT collected by a marketplace removes all of their VAT responsibilities. You may still need to account for VAT on sales made through your own website, direct invoices, retail channels or other platforms.

You may also remain responsible for VAT on imports, depending on how goods enter the UK and the terms of your supply chain. Import VAT and customs duties are separate issues from VAT charged on the final sale.

What should e-commerce SMEs do now?

There are several sensible steps you can take before any new legislation is introduced.

1. Map every sales channel

List each marketplace, website, social commerce account and delivery platform used by your business. Record where your goods are stored and where customers are based.

This will help you identify which transactions could potentially fall within the proposed rules.

2. Separate B2C and B2B sales

The consultation is focused on consumer sales. Sales to VAT-registered business customers may be treated differently.

Make sure your systems capture customer VAT registration numbers where relevant and distinguish business customers from consumers.

3. Review marketplace terms

Read your platform’s VAT and tax documentation. Check how the platform currently describes its role, how it issues statements and how it handles VAT adjustments.

Do not rely only on the amount paid into your bank account. Marketplace payouts may be reduced by fees, refunds, advertising charges and reserves.

4. Improve your records

Keep clear evidence for:

• Product descriptions and VAT rates

• Transaction dates

• Customer location

• Stock location at the point of sale

• Marketplace fees

• Refunds and cancellations

• Import VAT and customs paperwork

• Sales by platform

Good records will make it easier to adapt if the rules change and will support your VAT return if HMRC asks questions.

5. Review pricing and cash flow

If marketplaces start accounting for VAT, the way VAT is shown to customers and deducted from settlements could change. That may affect your displayed prices, margins and cash-flow forecasts.

Build a simple scenario showing how your margin would look if VAT were included in the customer price rather than added separately.

6. Speak to an adviser early

An accountant can help you assess whether your existing bookkeeping software, VAT scheme and marketplace integrations are suitable.

Accountant Search can help you find an accountant who understands VAT, e-commerce reporting and the needs of growing SMEs. If you operate through a limited company, you can also explore specialist limited company accountant support.

A separate consultation: zero-rated bare land for social housing

Deloitte’s August 2026 VAT update also highlights a separate government consultation on the VAT treatment of land intended for social housing.

The proposal would introduce a new zero rate for qualifying bare land intended for the construction of social housing. It could remove the need for developers to rely on the existing “golden brick” approach, where zero rating generally depends on construction progressing above foundation level.

This measure is separate from the online marketplace proposal and is unlikely to affect most e-commerce businesses directly. It does, however, show that the government is reviewing VAT rules across several sectors.

The land consultation also closes on 18 August 2026. You can read the GOV.UK online marketplace consultation, the HMRC factsheet, and Deloitte’s Weekly VAT News for 10 August 2026.

Final thoughts for UK e-commerce businesses

The online marketplace VAT crackdown is currently a consultation, not a new law. But it is important for e-commerce SMEs because it could change how VAT is collected, reported and reconciled on domestic marketplace sales.

The businesses best placed to respond will be those that already understand their sales channels, customer types, stock locations and margins.

Do not wait for a confirmed start date before improving your records. Review your marketplace reports, check your VAT treatment and get advice on areas that are unclear.

If you are looking for accountants for small business, Accountant Search can match your company with suitable accounting and VAT specialists. Plans start at £85pm+, and the right adviser can help you stay compliant while keeping your e-commerce business ready to grow.

Frequently asked questions

Has the online marketplace VAT crackdown become law?

No. The government is consulting on the proposal. The consultation closes on 18 August 2026, and no commencement date has been confirmed.

Will private sellers have to pay VAT under the proposal?

The proposal is aimed at businesses. Individuals selling personal second-hand goods as non-business sellers are expected to remain outside the rules.

Could marketplaces account for VAT on UK sellers’ sales?

Yes, that is the central proposal. Marketplaces could become responsible for accounting for VAT on qualifying consumer sales where goods are in the UK at the point of sale.

Is the possible £90,000 figure a new VAT threshold?

No. It is a possible minimum platform threshold being considered for the marketplace rules. It is not the same as the statutory VAT registration threshold.

Should I change my VAT process now?

You should not change your VAT treatment solely because of a proposal. However, you should review your records, reporting and marketplace agreements so you can adapt if legislation is introduced.