The United Kingdom Plans to Expand VAT Liability for E-Commerce Platforms

The United Kingdom government is considering expanding the responsibilities of e-commerce platforms for collecting value-added tax (VAT) to include domestic sellers. Under the proposed regulation, marketplaces such as Amazon and eBay would be required to collect taxes directly on transactions involving certain local sellers and remit them to the government. The government's proposal is expected to generate up to £1 billion in additional annual tax revenue.

The United Kingdom Will Expand VAT Coverage in E-Commerce

Under regulations in effect in the United Kingdom since 2021, online marketplaces are required to collect VAT arising from transactions conducted by overseas sellers under certain conditions. The new proposal aims to extend this responsibility to businesses operating within the country. The government is considering introducing a new threshold for businesses with annual sales exceeding £90,000 per platform.

Losses Resulting from VAT Evasion Will Be Reduced

The United Kingdom's tax authority, HMRC, estimates that tens of thousands of businesses selling through online marketplaces are failing to meet their VAT obligations. The cost of this situation to public finances could reach hundreds of millions of pounds. Authorities state that some foreign sellers establish shell companies in the country to appear as local businesses and cease operations before their taxes become due. The main objectives of the regulation include preventing such practices and protecting retailers that comply with their tax obligations.

Amazon Supports the Regulatory Proposal

Amazon announced its support for expanding the tax responsibilities of marketplaces. According to the company's estimates, the proposed changes could generate approximately £700 million in additional annual revenue for the government. Other estimates suggest that total tax revenue could approach £1 billion. However, critics argue that sellers could avoid exceeding the proposed tax threshold by distributing sales across different accounts or platforms.

Two Different Tax Options Are Being Considered for Small Businesses

The United Kingdom government is examining two options to limit the impact of the regulation on small businesses that are not required to register for VAT. The first option would require marketplaces to collect taxes only on behalf of businesses exceeding the specified sales threshold. The second option involves applying tax relief to businesses that remain below the VAT registration threshold. Sales of second-hand goods by individuals not engaged in commercial activities are excluded from the proposal.

The United Kingdom Will Direct Additional Tax Revenue to Physical Retail

Dan Tomlinson, a United Kingdom Treasury official, stated that it is unacceptable for businesses avoiding their tax obligations to gain a pricing advantage over companies that comply with the rules. Tomlinson announced that the additional revenue generated by the regulation would be used to reduce business property taxes for physical stores, restaurants, and other local businesses.

During the consultation process launched by the government on June 23 and concluded on August 18, 2026, the operational obligations of e-commerce platforms were also evaluated. While no specific provision regarding the use of artificial intelligence was announced, the proposal focuses on VAT collection in digital marketplaces and retail competition.