UK government extends online marketplace VAT liability to domestic sellers from October 2027
Published on 5 November 2026
Platforms will need to account for VAT on UK business sales of goods, subject to exclusions and a minimum threshold
At a glance
The extension of rules will apply to VAT-registered UK sellers and non-VAT registered sellers above a £90,000 annual sales threshold.
Business-to-business transactions, personal sales and second-hand goods are excluded from the rules.
Implementation is set for October 2027, with secondary legislation and detailed HMRC guidance to follow.
The UK government has confirmed that it will extend the current online marketplace (OMP) VAT liability rules to cover sales by UK businesses. The announcement at the autumn Budget follows a consultation that outlined the proposals and closed in August.
Under the current rules, OMPs are required to account for VAT on sales of goods to UK consumers that they facilitate on behalf of overseas businesses. The extension will apply the obligations to sales by UK-based businesses where the goods are situated in the UK at the point of sale.
New rules
From October 2027, OMPs will account for VAT on sales of goods by VAT-registered UK businesses, irrespective of the sales value on the platform. For non-VAT-registered UK seller businesses, liability will arise once annual sales on an individual platform exceed the £90,000 minimum platform threshold (MPT): this does not alter businesses' existing VAT registration obligations and does not apply to overseas sellers, who remain subject to the current rules.
The rules will not apply to non-business sales of goods, such as personal sales, business-to-business sales or sales of second-hand goods. The exclusion of second-hand goods is designed to preserve the benefits of the VAT margin scheme for businesses selling second-hand and refurbished goods, avoiding the effects on prices and margins identified by respondents to the consultation. The interaction of the extension of liability with the VAT flat rate scheme remains under consideration.
Deemed supplies
The current VAT legislation will be extended to provide for two deemed supplies: a deemed zero-rated supply of goods from the UK business seller to the OMP, followed by an onward supply from the OMP to the customer at the relevant VAT rate, with the OMP accounting for VAT on that onward sale.
Secondary legislation will be made in due course, covering the level of the MPT, how the threshold will operate, the treatment of second-hand goods, the planned date of implementation and other details. The government will also provide detailed guidance to support preparations.
Implications for platforms
The rules represent a significant extension of OMP VAT liability. Platforms will be looking to review their existing VAT processes ahead of October 2027. This will differ according to whether the OMP already administers the existing VAT liability in respect of goods sold by overseas businesses, or would be newly brought into the extended liability because the businesses on their platform are situated entirely in the UK.
OMPs will be looking to assess whether their existing seller data and verification processes can support the extended regime. Their focus will be on distinguishing business sales from personal sales and identifying business-to-business transactions and sales of second-hand goods; as well as verifying sellers’ VAT registration status and monitoring non-VAT-registered UK sellers’ annual sales on the platform against the MPT.
Osborne Clarke comment
While the new rules aim to combat persistent VAT non-compliance from both domestic and overseas businesses, they represent a significant extension of OMP VAT liability and will have wide operational and compliance implications for OMPs and the UK businesses that use them.
The MPT serves to limit the unintended impact on small businesses that are not required to register for VAT. The government has said it will monitor the threshold’s impact after implementation and assess evidence of its effectiveness as it emerges. It will also continue to consider the operational details and provide detailed guidance before implementation.
The government expects OMPs to incur greater one-off and ongoing costs than their sellers. Potential one-off costs include familiarisation with HMRC guidance and software updates to comply with the new rules. Ongoing costs could include monitoring sellers and listings, resolving seller disputes, checking seller compliance, and collecting and remitting VAT on sales within scope.
While platforms with no prior experience of the OMP liability regime face the steepest adjustment, those already administering VAT for overseas sellers will need to adapt existing infrastructure to a domestic context.
With less than a year until implementation, OMPs are already looking at auditing their seller verification processes and system capabilities against these potential requirements now. They should also be watching out for detailed guidance that HMRC has promised.
If you would like to discuss the implications of the new rules further, please get in touch with any of the contacts below.
