UK Government looks to increase VAT revenue from e-commerce activities through the lines of the Finance Bill 2026/2027. As part of the measures to increase VAT collection, it is proposed to extend the scope of deemed supplier accountability.
Background
A currently active framework for e-commerce, online marketplaces, and third-party vendors was implemented in January 2021, with a principal focus on VAT collection from overseas suppliers. Under these terms, the operator of the marketplace is accountable for VAT where it facilitates the following types of supplies:
- by overseas businesses to UK consumers of goods of any value located in the UK at the point of sale
- of goods which are imported in consignments with a value up to GBP 135
The positive effects for the state budget from the implementation of these rules have been very good. However, monitoring of VAT collection found a common denominator: many thousands of offline businesses misrepresent where they are established to online marketplaces to evade the rules, while many domestic economic operators also fail to register for VAT or under-declare their VAT liabilities.
Based on the collected results, the Government proposed a set of measures to reduce VAT fraud in e-commerce. One measure is to extend the scope of the deemed supplier concept.
As the first move, the consultation was launched in June 2026, and now this measure is part of the Finance Bill 2026/2027 and is under consideration by the legislative bodies.
Timeline
The government intends to implement this measure from October 2027.
UK Deemed Supplier
Under Finance Bill 2026/2027, the UK Deemed supplier rules will be extended to UK businesses for B2C transactions, where the goods are in the UK at the point of payment. E-commerce marketplace operators will become responsible for VAT collection on the sales made by UK VAT-registered suppliers, and any other UK business with a minimum annual sales threshold per marketplace of GBP 90,000.
The extended deemed supplier rules will not apply to customer-to-customer transactions (C2C), business-to-business(B2B), and second-hand goods.
Next Step
Before the proposed policy becomes a reality, the Finance Bill 2026/2027 needs to pass legislative steps and to be accepted