United Kingdom · HMRC & Online Marketplaces

HMRC to Extend Online Marketplace VAT Liability to Domestic UK Sellers: The £90,000 Threshold Explained

Building on the 2021 overseas seller rules, the UK Government and HM Revenue & Customs (HMRC) have announced plans to extend online marketplace (OMP) VAT liability to qualifying UK-established sellers exceeding £90,000 in platform sales, scheduled for implementation from October 2027.

What Has Changed?

Since 1 January 2021, online marketplaces (OMPs) such as Amazon, eBay, and TikTok Shop have been treated as the 'deemed supplier' for VAT purposes when facilitating sales of goods imported from outside the UK in consignments up to £135, or sales of goods of any value located in the UK by non-UK established businesses. Following consultations, HMRC has announced a major policy shift: from October 2027, the deemed supplier model will expand to capture UK-established domestic businesses operating on third-party platforms.

1. How the Domestic Deemed Supplier Model Operates

Under the proposed extension, where a UK seller meets the qualifying threshold on a platform, the statutory tax liability transfers directly to the marketplace operator. The transaction is split into two fictional supplies for VAT purposes:

• Seller to Marketplace: A deemed zero-rated B2B supply from the merchant to the platform.
• Marketplace to Consumer: A standard-rated deemed supply from the platform to the end-buyer, with the marketplace responsible for collecting and remitting UK VAT directly to HMRC.

This removes the risk of domestic tax default and closes the competitive gap between compliant retailers and under-reporting domestic third-party merchants.

2. The £90,000 Platform Threshold and Exclusions

The rules are calibrated to target commercial operators while safeguarding micro-sellers and private hobbyists:

• £90,000 Threshold: The liability shift applies once a UK business reaches £90,000 in gross annual sales on a specific platform (aligning with the UK standard statutory VAT registration threshold).
• B2B Transactions Excluded: Where the transaction is between two VAT-registered businesses and a valid UK VAT number is supplied at checkout, the normal direct billing rules apply.
• Second-Hand Goods: Goods traded under the VAT margin scheme for second-hand items and private consumer sales are currently excluded from mandatory deemed supplier withholding.

3. Impact on UK Merchant Cash Flow and Input Tax Recovery

While this change eliminates direct output VAT liability on platform sales for sellers, it profoundly impacts working capital. Domestic UK merchants will no longer collect output tax from customers to fund operational cash flow prior to quarterly HMRC payments. However, merchants retain full entitlement to reclaim input VAT incurred on business overheads, domestic wholesale stock purchases, and fulfillment costs through their regular Making Tax Digital (MTD) returns.

4. Concurrent UK E-Invoicing Roadmap (April 2029)

Alongside marketplace liability, HMRC has confirmed its digital roadmap toward mandatory B2B e-invoicing starting in April 2029, which will gradually integrate with automated platform reporting and digital audit streams.