The UK Budget on 28 October announced that from October 2027, online marketplaces would be responsible for VAT on qualifying sales by UK businesses.
The change is not yet law; it is due to be legislated in the Finance Bill 2026/27. For UK platforms, this is a major change. For businesses that trade across borders, it is a familiar one.
What's changing for UK online marketplaces
Since 2021, UK marketplaces have been the deemed supplier for sales by overseas sellers. The proposed change would extend this to UK sellers: the platform would account for VAT on qualifying B2C sales of goods located in the UK at the point of sale.
All UK VAT-registered sellers are in scope. Non-registered sellers come into scope once their annual sales on a single platform exceed £90,000. B2B sales, personal sales and second-hand goods are excluded.
Which marketplaces and sellers will be affected
Marketplaces already running the overseas-seller rules should be able to build on what they have. Platforms outside the 2021 regime face more work, and food delivery is the clearest case. Food delivery operators could expect more extensive system changes, and food delivery and hospitality respondents flagged mixed VAT rates, promotions and franchise models. The proposed rules refer to goods and do not address takeaway, so that treatment will depend on the legislation and HMRC guidance.
What Fonoa has seen before
We've explored these challenges in our Fonoa Tax Essentials webinar on marketplace taxation, covering seller obligations, compliance requirements and how tax technology can help.
Platform liability is spreading, and each regime has its own scope, thresholds and start dates.
Platforms need to know who is liable, apply the right rate to each item, track seller status and reconcile it all to returns.
How Fonoa helps marketplaces manage VAT
- Liability per transaction. The engine decides whether the marketplace or the seller is liable and explains why, giving tax teams an audit trail.
- Reliable seller data. Real-time tax ID validation in 120+ countries helps confirm seller status before tax logic runs.
- Configurable rules. Content is customised per client, so new tests, such as a per-platform threshold, can be added without a rebuild.
- Commission and invoicing. Tax on platform commission, and compliant invoices issued on behalf of sellers.
- Returns. Multi-country return preparation, with each figure traceable to its transactions.
- Regulatory monitoring. Fonoa’s attorneys and tax researchers track legislative changes and feed them into the engine.
One global online courses marketplace became compliant with marketplace rules in 21 countries, issued 60,000 invoices in its first month and went live in two weeks, against a six-month industry benchmark.
How to prepare for the October 2027 VAT changes
You have about twelve months. Map sellers by VAT status and platform turnover, test rate logic on real baskets and promotions, and plan for reporting on your own VAT return. Teams that prepare before HMRC’s guidance lands will have the easiest path to October 2027.
