Chancellor John Healey is considering plans to make online marketplaces collect VAT from retailers selling through their platforms, in a move that could raise up to £1 billion.
The measure could apply to platforms such as Amazon, eBay and Temu. Revenue raised would help fund business rates cuts for high street retailers. The government has not confirmed the plans.
The proposal would build on existing rules requiring marketplaces to account for VAT on certain sales by overseas sellers. Under current guidance, platforms are liable for VAT on goods sold by overseas retailers when the goods are already in the UK, and on imported consignments worth £135 or less.
In June, HM Treasury and HM Revenue & Customs consulted on extending marketplace liability to sales by UK businesses using platforms.
The consultation said VAT non-compliance by both overseas and UK-based businesses distorted competition and disadvantaged compliant firms trading online and on the high street. It sought views on how to minimise the impact on businesses that are not required to register for VAT.
The reported crackdown came as retailers pressed the government to reduce the tax burden on physical stores.
Healey met retail and hospitality leaders at Downing Street on Tuesday, including representatives from Tesco, Sainsbury’s, Marks & Spencer and the Co-op. He did not outline his Budget plans at the meeting, City AM reported.
British Retail Consortium chief executive Helen Dickinson told Healey that retailers’ taxes had risen by 20 per cent in two years, including an additional £6.5 billion in employment costs. She called on the government to ease costs and make tax fairer in the Budget.
The government’s consultation also sought evidence on the administrative and operational impact of making marketplaces liable for more sellers’ VAT.
The extent of any new collection requirement, its timing and how it would affect smaller businesses have yet to be confirmed. The Budget is due on October 28.
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