Extending Online Marketplace VAT Liability to UK Businesses

On 23 June 2026, HMRC published the Tax Update 2026: Simplification, Modernisation and Fairness, a package of 40 measures, several of which directly impact VAT, e-invoicing, customs and indirect tax compliance.

Summary

HMRC has opened a consultation to extend VAT online marketplace liability rules so that marketplaces become jointly liable (or fully liable) for VAT on sales made by UK-established sellers, mirroring the regime already in place for overseas sellers since 2021.
The reform targets persistent VAT under-declaration in the digital economy, particularly missing-trader behaviour, mis-classification of B2C as B2B, and abuse of the small-business threshold by sellers fragmenting their activities across multiple marketplace accounts.
Consultation closes 18 August 2026, with legislation likely in Finance Bill 2026-27; multinationals operating marketplace or hybrid retail/3P models should map exposure now, including indemnity flows, KYC obligations on sellers, and ERP/tax-engine changes to flag “deemed supplier” transactions.

Article The Government is consulting on reforms to Online Marketplace VAT Liability, further extending the rules so marketplaces become accountable for VAT due on sales made via their platforms by UK sellers as well as overseas ones. Coupled with the bringing-forward of reforms to low-value imports (originally announced at Budget 2025), this is part of HMRC’s drive to level the playing field for legitimate high-street businesses and tackle fraud in the digital economy.

Primary Sources