UK: Consultation on expansion of marketplace rules to sales of goods by domestic sellers

HMRC on June 23, 2026, launched a consultation until August 18, 2026, regarding extending the UK’s online marketplace (OMP) rules to also include sales made by UK sellers when the goods are physically in the UK. HMRC states that their main objective is to tackle ongoing non-compliance and distortions through these measures.

The consultation includes several proposals:

• Minimum platform threshold (MPT) set at the VAT registration threshold (GBP 90,000 per platform): Under this option, the government would make an online marketplace responsible for VAT on UK business sales only where that business’s annual sales on that specific platform exceed GBP 90,000, which aligns with the current UK VAT registration threshold.
• MPT set below the VAT registration threshold: Under this alternative, the government would still apply a per‑platform threshold, but it would set that threshold below £90,000 so that more UK businesses fall within the extended marketplace VAT rules. This model aims to close opportunities for non‑compliant traders who fragment their sales across platforms or multiple accounts to remain below higher thresholds, thereby tackling more of the current VAT losses.
• VAT rate relief for UK businesses below the VAT registration threshold: Instead of, or alongside, an MPT, the government could introduce a form of VAT rate relief for UK businesses whose total gross receipts remain below the VAT registration threshold but whose sales via online marketplaces become subject to VAT at the platform level. Under this option, an online marketplace would still charge VAT on consumer sales, but a reduced effective rate would apply to eligible small UK businesses to soften the impact on their margins and pricing. This relief would aim to protect the smallest traders who prefer not to VAT‑register, but it also introduces a risk that overseas businesses may misrepresent themselves as UK‑based to benefit from the favorable treatment, so robust checks and design safeguards would be essential.
• Individuals not in business will not be in scope of the proposed extension to OMP rules: This would include, for example, individuals selling secondhand clothes, trading collectables, or selling other unwanted goods.
• Excluding second‑hand goods sold by UK businesses from the extended marketplace liability rules: One option for second‑hand goods would exclude these sales from the extended online marketplace liability rules so that VAT‑registered UK businesses selling second‑hand items via platforms could continue to apply the Second‑hand Margin Scheme in the same way as for other channels. This approach would avoid forcing online marketplaces to charge VAT on the full selling price of second‑hand goods, which could otherwise undermine the profitability and competitiveness of traders who currently account for VAT only on their profit margin. However, the government recognizes that this exclusion would require careful design and monitoring, because it could create opportunities for traders to mislabel new goods as secondhand to avoid VAT at the full rate.
• Including second‑hand goods but not allowing the Second‑hand Margin Scheme on marketplace sales: The alternative approach would keep second‑hand goods sold by UK businesses within the extended online marketplace liability rules and require online marketplaces to account for VAT on the full sale price, without giving them access to the Second‑hand Margin Scheme. This option would simplify the marketplace’s VAT calculations by applying standard rules to all relevant transactions, but it would significantly change the VAT position for second‑hand sellers who currently charge VAT only on their margin. Businesses in this sector could face pressure on pricing and margins and might need to adjust their business models or channel mix if they wish to continue using online marketplaces at scale.