John Healey weighs £1bn marketplace VAT collection plan

Chancellor John Healey is considering extending online marketplaces’ responsibility for collecting VAT on UK retail sales, potentially raising up to £1bn ahead of the Budget on 28 October.

Amazon, eBay and Temu are among the platforms that could be affected, Retail Gazette reports. Ministers have yet to confirm whether the proposal will proceed.

What happened

The proposed change would place responsibility for collecting VAT on marketplaces for more transactions made by retailers using their platforms. It would expand an existing system under which platforms already account for the tax on certain overseas sellers’ sales.

The additional revenue would help finance business rates reductions for high street retailers. That proposed link between online tax collection and physical-store relief comes as Marks & Spencer and John Lewis press for Budget tax relief.

HM Treasury and HM Revenue & Customs consulted in June on bringing sales by UK businesses within marketplace VAT liability. Their consultation also asked for evidence about the administrative work and operational changes that a wider requirement would involve.

The background

Existing guidance makes marketplaces responsible for VAT when overseas retailers sell goods that are already held in the UK. Platforms also have liability for imported consignments valued at £135 or less.

The June consultation identified non-compliance among both domestic and overseas businesses as a competitive problem. Its stated concern was that businesses failing to meet their VAT obligations put compliant operators at a disadvantage, whether they sell through websites or physical shops.

Businesses that do not have to register for VAT were a separate focus of the exercise. Officials sought views on limiting the impact on those firms, leaving their treatment as an important distinction within any broader collection regime.

What people are saying

British Retail Consortium chief executive Helen Dickinson told Healey that the sector’s taxes had increased by 20% over two years. She also highlighted £6.5bn of additional employment costs and urged the government to reduce cost pressures and improve tax fairness in the Budget.

Healey met retail and hospitality representatives at Downing Street on Tuesday. Tesco, Sainsbury’s, Marks & Spencer and the Co-op were represented, but he did not set out his Budget measures during the meeting.

The retail lobbying sits alongside objections to other potential tax changes, including Hargreaves Lansdown’s warning against a capital gains tax rise. That concerns a separate tax rather than the proposed marketplace collection requirement.

What happens next

The Budget is scheduled for 28 October, although no implementation date has been confirmed for a marketplace VAT change. The scope of any extension and its effect on smaller businesses also remain unsettled.

The proposal is one of several tax options receiving attention before the statement, alongside reports that the Treasury has dropped a £1.5m mansion tax threshold. For marketplace operators and their sellers, the outstanding issue is whether the government will turn the June consultation into a defined collection obligation.