On 23 June, HMRC and the Treasury opened a consultation that most of my e-commerce clients have not heard about, and the ones who have heard about it read it as good news. The headline they take away is that Amazon, eBay and Etsy might soon handle the VAT on their sales for them. One less return, one less thing to get wrong. That reaction is understandable, and I think it is a mistake. The proposal is not really a favour to small sellers. For a certain kind of business it quietly removes the one advantage they were built on.
TL;DR: HMRC wants to extend the marketplace "deemed supplier" rule to UK sellers with UK-based stock, so platforms collect the VAT. For a compliant, registered seller it is mostly admin. For a business whose margin depends on sitting under the £90,000 threshold, it could end that model without anyone formally abolishing the threshold. The consultation closes 18 August 2026.
What Is HMRC Actually Proposing?
HMRC wants to make online marketplaces the "deemed supplier" for sales by UK-based businesses whose goods are already in the UK. In plain terms, the law would pretend the marketplace bought the goods from you and sold them to the customer, so the platform accounts for the output VAT instead of you. The consultation, "Extending online marketplace liability to combat non-compliance", ran from 23 June and closes on 18 August 2026 (GOV.UK, 2026).
This is not a brand-new idea. Since 2021 the deemed supplier rule has applied to overseas sellers whose stock sits in UK warehouses, the classic Amazon FBA arrangement. What is new is extending it to UK-established sellers. The mechanics stay the same. The population it catches gets much larger, and this time it reaches ordinary British businesses rather than only the offshore ones the 2021 reform was aimed at.
Why Is HMRC Coming After Marketplace VAT Again?
Because the last time it tried this, it worked, and there is money still on the table. HMRC says the 2021 overseas-seller reforms have raised more than £8 billion so far and continue to bring in around £1.8 billion a year, when combined with scrapping low-value consignment relief (GOV.UK, 2026).
The logic is blunt and hard to argue with. HMRC estimates that tens of thousands of UK-based businesses trading through marketplaces are not meeting their VAT obligations, with the potential loss running into the hundreds of millions (GOV.UK factsheet, 2026). Chasing a very long tail of small sellers one by one is slow and expensive. Collecting from a handful of large platforms that already hold all the transaction data is not. When a tax authority can move the collection point from thousands of hard-to-find sellers to five companies it can name, it usually does. That is the equilibrium this design is chasing.
Who Is Actually in Scope?
More businesses than the write-ups suggest, and two cohorts in particular. The obvious one is product sellers on Amazon, eBay, Etsy and similar sites who hold stock in the UK. The one most coverage buries is food. The consultation singles out the online food delivery sector as a particularly persistent area of VAT non-compliance, which pulls the restaurants, fast-food kitchens and takeaways selling through delivery apps into the same frame as the product sellers.
That second group matters to me because I have hospitality clients on those platforms who assume this is a story about Amazon and nothing to do with them. It is not. If your kitchen sells through a delivery app and the platform becomes the deemed supplier, the VAT treatment of those orders changes in the same way it does for a phone-case seller on eBay. I have written before about how oddly VAT behaves on food and meal-deal bundles, and delivery orders sit right in that awkward zone. One thing is clear from the document: genuine private individuals, someone clearing out the loft on eBay, stay out of scope. This is aimed at businesses.
What Does This Do to the VAT Threshold?
This is the part almost nobody is saying loudly, and it is the whole reason I would not cheer. Right now a seller trading under the £90,000 VAT registration threshold charges no VAT and can undercut a registered competitor selling the identical item on the identical platform. That threshold has sat at £90,000 since 1 April 2024. If the marketplace becomes the deemed supplier and accounts for VAT on the sale regardless of the seller's own registration status, that price gap is at risk of quietly closing.
I want to be careful here, because the consultation has not decided this. How genuinely small, sub-threshold sellers get treated is a live design question, and it is the single most consequential thing in the document for my clients. The government floats a "Minimum Platform Threshold" set at £90,000 to shield the smallest sellers, but then admits in the same breath that a threshold set at that level would fail to address a significant proportion of the non-compliance it is trying to fix (GOV.UK, 2026). So the mitigation that protects small sellers is the same mitigation that undermines the policy's own point. That tension does not resolve itself quietly.
Read it through: if platforms end up accounting for VAT whatever the seller's status, the threshold has effectively been abolished for marketplace sales without anyone abolishing the threshold. If they do not, the platform has to police a registration line it cannot see. Either way, a business whose competitive position rests on not being registered is the one with something real at stake. I made a similar point about who actually absorbs a VAT change in my piece on the summer VAT cut: the statutory label on a tax rarely tells you who ends up paying it.
What I'm Telling Marketplace Clients Now
Nothing changes today, so keep filing exactly as you do now. This is a consultation, not law, and there is no deadline to act on beyond responding by 18 August if you want a say. What I am doing is a scoping call with any client who sells through a platform, product or food, to work out which side of this they land on.
For a compliant, VAT-registered seller, this is mostly administrative noise and possibly a small simplification down the line. For a seller whose whole pricing model depends on staying under the threshold, it is the most important thing published this summer, and I am asking them to model now what their prices and margins look like if 20% VAT lands on every sale. This is not paperwork to file, it is a business-model question, better answered in July than discovered in a future Finance Act. The same discipline I apply to shifting VAT deadlines applies here: being caught unprepared always costs more than looking early.
Frequently Asked Questions
What is the "deemed supplier" rule and who pays the VAT on an Amazon or eBay sale?
The deemed supplier rule treats the marketplace, for VAT purposes, as if it bought the goods from you and sold them to the customer. When it applies, the platform, not you, accounts for the output VAT on the sale. Since 2021 this has applied to overseas sellers with UK stock. The June 2026 consultation proposes extending it to UK-based sellers with UK-located goods.
If the marketplace accounts for the VAT, do I still need to be VAT registered?
That is the open question the consultation has not answered. Under the current proposal the platform could account for VAT on your marketplace sales, but your obligations for any sales made off-platform, and your own input VAT recovery, would still depend on your registration status. Do not deregister or change anything on the strength of a consultation. Wait for the rules.
Does this affect takeaways and restaurants selling through delivery apps?
Yes. The consultation names online food delivery platforms as a persistent area of VAT non-compliance and brings the restaurants, kitchens and takeaways selling through them into scope alongside product sellers. If your business takes orders through a delivery app, this proposal is aimed at you as much as at any Amazon or eBay seller.
When does this take effect and what should I do before 18 August?
Nothing is law yet. The consultation closes on 18 August 2026, after which HMRC and the Treasury will consider responses before deciding on any legislation. Before then, the useful action is to identify whether you or your business is exposed, model the pricing impact if VAT lands on your sales, and, if the sub-threshold question matters to you, respond to the consultation.
If you sell on a marketplace or take orders through a delivery app and you are not sure which side of this you land on, get in touch and I will run through where your VAT position is actually exposed, and what your prices would need to do if this becomes law.