UK: Online marketplaces liable for VAT on goods sold by overseas businesses

HM Revenue & Customs (HMR) on June 20, 2025, issued guidance confirming that online marketplaces are liable for value added tax (VAT) on goods of any value when those goods are located in the UK at the point of sale and sold by overseas businesses. To comply, marketplace operators must take reasonable steps to determine whether a seller is established outside the UK.

HMRC does not prescribe specific checks but expects businesses to tailor their approach based on factors like business size, internal risk systems, and the circumstances of each case. Platforms must retain evidence of the steps taken, as HMRC may request this to assess whether the actions were appropriate, timely, and sufficient in addressing the risks.

HMRC provides illustrative examples of checks that online marketplaces might use to assess a seller’s UK establishment status. These are not mandatory or exhaustive but serve as guidance to help gather supporting evidence:

• Check for a UK principal place of business – Confirm whether the seller has a main business location in the UK.
• Verify VAT registration – Confirm the seller’s VAT registration matches their legal name and details using HMRC’s “Check a UK VAT number” tool
• Companies House registration – Check if the seller is registered at Companies House with a UK address, where applicable
• Director residency – Determine whether the seller’s directors reside in the UK, for example, by reviewing Companies House records
• Financial and payment information – Look for indicators of a UK presence such as:
  • UK bank or credit card details
  • A UK merchant address linked to the seller’s bank account
  • Financial data from independent payment service providers
• Commercial background checks – Check other commercially relevant information such as credit checks and other background checks from third-party sources
• Geolocation data – Check whether the seller’s device uses a UK IP address or apply another method of geolocation
• UK phone number – Confirm that the seller uses a phone number with a UK country code

If taxpayers find indicators that throw doubt on whether the seller is UK established, the guidance provides that they should undertake further checks.

KPMG observation

The recent guidance underscores the critical need for online marketplaces to implement robust Know Your Customer (KYC) procedures for third-party sellers operating on their platforms. As tax authorities across Europe, including the UK, intensify their focus on compliance, marketplaces are increasingly required to conduct thorough due diligence checks on vendors. This trend reflects a broader regulatory shift aimed at enhancing transparency and accountability in digital commerce. For example, platforms that facilitate sales of accommodation, transportation, personal services, and goods within the EU and UK are now obligated to report essential transaction data and vendor information to tax authorities. This requirement not only guarantees tax compliance but also helps in mitigating risks associated with fraudulent activities and tax evasion.

For more information, contact a KPMG tax professional:

Philippe Stephanny | philippestephanny@kpmg.com

Chinedu Nwachukwu | chinedunwachukwu@kpmg.com