The government reportedly wants marketplaces to collect VAT on sales by larger UK sellers. Here’s what changes could be announced in the Budget.
- The government reportedly wants online marketplaces to collect and pay VAT on sales by UK business sellers turning over more than £90,000 per platform.
- The measure could raise up to £1bn a year, which would fund lower business rates for high street retailers.
- Smaller sellers would be spared, but sellers close to the threshold may face cash flow and compliance changes.
The government is reportedly planning to make online marketplaces responsible for collecting VAT on sales by larger UK sellers making over £90,000 a year.
The policy, which excludes small sellers earning below this threshold, is expected to raise up to £1bn a year – a sum which the government plans to put towards lower business rates for high street shops.
With the Budget on 28 October, here’s what the proposals could mean for your business.
What is the government proposing?
Since 2021, marketplaces have been responsible for collecting VAT on certain sales by overseas sellers. Under the new plans reported by The Times, that duty would extend to UK-based business sellers too.
HMRC’s lead figure is £90,000, matching the current VAT registration threshold, applied per platform rather than across a business as a whole. HMRC has also asked for views on setting the threshold lower, though it says this is not its lead proposal.
The extra revenue is intended to pay for lower business rates on the high street. Prime Minister Andy Burnham has pledged to give family-owned businesses “the chance to thrive”.
His by-election commitment to raise the business rates threshold would take 140,000 small high street retailers out of the tax at an estimated cost of about £880m
What could the changes mean for small sellers?
Sellers below the threshold are expected to be spared, but those nearing it could feel an impact.
Since the threshold is reportedly per platform, a business turning over £70,000 on Amazon and £60,000 on eBay wouldn’t be treated the same as one selling £130,000 on a single site.
There’s a cash flow angle too. VAT-registered sellers currently hold the VAT they collect until their return falls due, and those who sell mostly through marketplaces could find themselves regularly owed money by HMRC.
In practice, this could mean less cash available to cover day-to-day costs, such as stock, wages and shipping, while sellers wait for VAT repayments. As a result, businesses may need to plan more carefully around payment timings to avoid cash flow gaps.
Nothing is confirmed until the Chancellor speaks on 28 October, but until then, there’s plenty you can do to prepare.
- Check your sales on each platform – The threshold is reportedly applied per platform, so see how close your turnover on Amazon, eBay or Etsy is to £90,000.
- Review your cash flow – If a marketplace starts accounting for your VAT, your repayment position with HMRC could change. Talk to your accountant about the impact.
- Keep your records tidy – Clean sales and VAT data will make any switch to marketplace collection easier to manage.
- Don’t try to split sales to stay under the line – Critics expect this tactic to be a focus of anti-avoidance rules. Seek advice before restructuring how you sell.
