UK VAT reform for online marketplaces

The UK government has proposed and subsequently announced tax reforms targeting online marketplaces to ensure a level playing field for traditional high street retailers.

Initial reports indicated that Chancellor John Healey planned to reform VAT collection by making online platforms responsible for collecting tax on all retailers with an annual turnover exceeding £90,000, regardless of location. This measure was intended to prevent foreign firms from using shell companies to bypass tax rules and could potentially raise up to £1 billion. During the proposal stage, eBay UK expressed support for ensuring overseas sellers meet tax obligations but cautioned that the government must ensure small UK businesses are not “unfairly” penalized.

Following the official UK Budget announcement, the government confirmed that starting in October 2027, marketplaces like Amazon and eBay will be responsible for collecting VAT on sales made by UK-based businesses exceeding the £90,000 turnover threshold. Additionally, the government announced changes to Income Tax payments effective April 2029, requiring taxpayers making Payments on Account to make smaller, more frequent contributions to align payments with when income is earned.