The UK government is consulting on extending VAT liability to online marketplaces for domestic sellers, addressing tax fraud and ensuring compliance. Current rules, established in 2021 for overseas sellers, may inadequately cover UK businesses, particularly in retail and food sectors.
UK Proposes Extending VAT Liability to Online Marketplaces for Domestic Sellers
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United Kingdom
Author: Ema Stamenković
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Content accuracy validation date:
06.07.2026
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08:04h
The UK government has launched a consultation on extending VAT liability for online marketplaces to tackle tax fraud and level the playing field for compliant sellers.
The proposals examine whether current VAT rules — introduced in 2021, which made marketplaces liable for VAT on sales by overseas sellers — should be extended to cover UK-based sellers as well. The government argues the existing rules have not kept pace with the growth of online sales by UK businesses, particularly in retail, restaurant, and takeaway food sectors, where sellers continue to find ways to avoid VAT.
Online sales now represent 28% of all retail sales, yet marketplace sales are only partially covered by current compliance rules. HMRC estimates that tens of thousands of businesses trading via online marketplaces are failing to meet their VAT obligations, costing the public purse hundreds of millions of pounds annually.
The consultation (open until 18 August) seeks views on better enforcement and proposes making online marketplaces responsible for collecting and remitting VAT on sales by domestic sellers as well as overseas ones. The aim is to create a comprehensive compliance framework across all sectors using online marketplaces and to level the playing field between online and high street businesses.
The paper particularly highlights VAT non-compliance in the delivered hot food sector on takeaway platforms, where UK-based restaurants and outlets were largely exempt from the 2021 reforms.
Implications for Marketplaces
The impact will vary depending on whether platforms already handle VAT for overseas sellers or operate entirely in the UK. Platforms facilitating non-business sales (e.g., individuals selling second-hand goods) must still prove these qualify as non-business under existing VAT rules.
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