UK Budget Plan: Making Marketplaces Collect VAT, Explained
John Healey is reportedly preparing to make online marketplaces liable for VAT owed by third-party sellers in his 28 October budget, a measure billed as raising up to £1bn.
The proposal was first detailed by The Times and reported on 14 October. It would shift collection to the platform operator. It would be Healey's first budget as chancellor. The Guardian
Under the reported design, marketplaces including Amazon, eBay and Temu would collect VAT at source. VAT is the sales tax added to most goods and services. The duty would apply to sales by retailers with annual turnover, or total yearly sales, above £90,000. The legal obligation would fall on the platform rather than the individual seller. The measure is described as targeting foreign retailers alleged to have avoided VAT because rules and enforcement were not strong enough.
The Times reported that the revenue would be used to fund cuts to business rates for high street shops. Business rates are the property tax paid on shops and other commercial premises. The Telegraph, under the headline 'Healey plots £1bn Budget crackdown on online retailers', reported that companies such as Amazon and eBay will be liable for collecting tax from retailers on their sites. Reuters on 13 October, citing The Times, reported that Healey was expected to target online marketplaces in a tax crackdown. Reuters
Before his election in Makerfield, Andy Burnham said he would raise the business rates threshold so 140,000 small high street retailers would pay no tax. The government said in July it will crack down on businesses selling through online marketplaces that do not comply with their tax obligations, alongside announced cuts to business rates bills for pubs, clubs and live music venues. GOV.UK
Healey's October budget initiatives are also expected to include a cost-of-living package. He is expected to pay for budget measures with higher taxes or spending cuts and without additional borrowing, according to Reuters reporting of Financial Times interviews published on 14 October. A Treasury spokesperson said tax decisions are for the chancellor to set out at fiscal events and declined to comment on rumour or speculation.
The Institute for Fiscal Studies warned Healey his budget risks being a “work of fiction” unless he covers £35bn in spending pressures. The International Monetary Fund upgraded its UK GDP growth forecast for 2026 to 1.3%, up 0.3 percentage points from its July update. IMF economic counsellor Silvana Tenreyro said the UK “stands out” among G7 countries in having a plan to narrow its deficit.
The broader context here is how London seeks revenue without borrowing and without a general rate rise. A platform liability model changes the collection point, like moving a toll booth from many side roads to one main gate. It reduces reliance on thousands of non-resident sellers to register and remit, and places systems costs on large intermediaries with transaction data. The trade-off is incidence. Platforms may pass compliance costs through in fees or pricing, while domestic sellers above the threshold face no change in liability, only in collection mechanics.
Looking at what this means for the budget, the test will be specification. Liability rules, due diligence standards, dispute procedures and HMRC audit powers will determine yield. So will interaction with the promised business rates relief. The figures remain reported estimates until Healey confirms them on 28 October. The date is set. The politics are tight.
