Online marketplaces and overseas sellers: VAT

When an online marketplace facilitates a sale of goods imported in a consignment worth £135 or less, or a sale of goods already in the UK by a seller established outside the UK, section 5A of the VAT Act 1994 treats the marketplace as the seller to the customer, so the marketplace charges and accounts for the VAT. The overseas seller is treated as making a zero rated sale to the marketplace. Consignments over £135 follow the normal import VAT and customs rules.

What counts as an online marketplace for VAT?

HMRC defines an online marketplace as a business using a website or app to handle the sale of goods to customers which meets all three of these conditions: it sets, in any way, the terms and conditions on which goods are supplied; it is involved in any way in authorising or facilitating payment; and it is involved in ordering or delivering the goods. A business that only processes payments, only lists or advertises goods, or only redirects customers to other sites without further involvement, is not an online marketplace for these rules.

The test is functional, so a large retail platform and a smaller niche site can both qualify. A seller’s own web shop, where the seller is the only merchant, is not a marketplace at all; the seller simply makes the sale itself. For how marketplace payouts should be recorded in the books, see bookkeeping for marketplace and payment processor payouts.

When does the marketplace become liable for the VAT?

Section 5A applies where a seller makes a taxable supply of goods in the course of business, the supply is facilitated by an online marketplace, and either:

• the imported consignment condition is met: the sale involves the goods being imported, the intrinsic value of the consignment is not more than £135, and it contains no excise goods; or
• the goods are not imported as part of the sale (they are already in the UK) but the seller is established outside the UK.

Where it applies, the seller is treated as supplying the goods to the marketplace operator and the operator as supplying them to the customer. For goods in the UK sold by an overseas seller there is an exception: if the customer is UK VAT registered, gives the marketplace its VAT number, and the marketplace passes that number and the sale details to the seller, section 5A does not apply and the seller accounts for the VAT itself.

The rules do not apply to non commercial goods such as gifts, or to consignments from Jersey and Guernsey where VAT is paid to HMRC under the Import VAT Accounting Scheme. For Northern Ireland, the marketplace is liable for goods in Northern Ireland sold to customers there only where the seller is established outside both the UK and the EU; see VAT and goods in Northern Ireland.

How does the £135 consignment rule work?

For goods outside the UK at the point of sale, the place of supply rules in section 7 of the VAT Act 1994 decide where VAT is due. Where a consignment of £135 or less is sold to a GB customer, VAT is charged as a UK supply at the point of sale rather than as import VAT at the border. When the sale goes through a marketplace, section 7(5A) treats the seller’s deemed sale to the marketplace as made outside the UK, so only the marketplace’s onward sale is taxed here.

The £135 limit applies to the whole consignment, not each item. The value is the intrinsic value, which is the sale price excluding transport and insurance (unless they are included in the price and not shown separately) and excluding other identifiable taxes and charges. Items sent together must be added up unless sent individually. If the consignment value is later changed so it exceeds £135, import VAT and customs duty may become due and the VAT already accounted for must be adjusted. Low value consignment relief, which used to exempt goods worth £15 or less from import VAT, has been removed for goods imported into Great Britain.

Above £135, normal import rules apply: import VAT and any customs duty are paid when the goods enter the UK, and the marketplace has no special liability for that consignment.

What does the overseas seller still have to do?

Overseas sellers who hold stock in the UK, for example in a fulfilment warehouse, remain liable for import VAT and customs duty when they bring the goods in. When the goods are later sold through a marketplace, the seller’s deemed supply to the marketplace is zero rated and no invoice to the marketplace is needed. A seller making only these zero rated deemed supplies can either register for VAT or apply for exemption from registration. Registering lets the seller reclaim the import VAT under the normal input tax rules.

An overseas seller must register if the marketplace passes it the VAT details of a business customer, because it then accounts for the VAT on that sale. As a non established taxable person there is no registration threshold: any taxable supply in the UK triggers the requirement. Once registered, the seller should give its VAT number to every marketplace it uses and trade under the same business name as on its registration, or the marketplace may remove it when the name does not match the VAT number checker.

HMRC can direct a non compliant overseas seller to appoint a UK VAT representative and can ask for security. A seller cannot appeal against a direction to appoint a representative, though it can appeal against registration, assessments and a security requirement.

What checks must marketplaces carry out?

Marketplaces must check that overseas sellers are VAT registered where those sellers sell goods located in Northern Ireland to Northern Ireland customers, or sell goods in the UK to businesses that provide a valid VAT number. HMRC’s guidance sets out the expected steps:

• validate a seller’s VAT number within 10 days of receiving it, and display a verified number on the site within 10 days
• treat a clear mismatch between the seller’s name and the name on the VAT number checker as a sign the number belongs to someone else
• check the seller’s location, the location of the goods, delivery speeds and fulfilment methods
• suspend or remove a seller who must be registered but has not provided a valid number after 60 days of trading

Can the marketplace be made liable for a seller’s unpaid VAT?

Yes, in two ways. Under section 77B, HMRC can give the operator a notice about a non compliant seller. If the operator does not stop that seller offering goods within the period specified (usually 30 days), it becomes jointly and severally liable for the VAT on the seller’s marketplace sales while the notice has effect. The operator cannot appeal the notice itself, only any resulting assessment. Separately, under the “knew or should have known” test, an operator that fails to stop an unregistered overseas seller within 60 days of when it knew or should have known the seller should be registered can be assessed for the unpaid VAT.

Assessments under section 77C must be made within two years after the end of the month concerned or, if later, one year after HMRC has sufficient evidence, and never more than four years after the end of the month.

Can you show how this works in practice?

Illustration only. A US based seller with no UK establishment lists goods on a marketplace that meets HMRC’s definition.

Sale	Who accounts for UK VAT
£60 item shipped from the US to a consumer in England	The marketplace charges 20% VAT (£12) at the point of sale; no import VAT at the border
£200 item already in a UK warehouse, sold to a consumer	The marketplace accounts for VAT on the sale; the seller’s deemed supply to it is zero rated
£200 item in the UK sold to a VAT registered business that gives its VAT number	The seller accounts for the VAT and must be registered
£400 consignment shipped from the US to a consumer	Normal import rules: import VAT and any duty are paid on entry

The seller reclaims the import VAT it paid on the warehouse stock only if it is VAT registered.

What are the common mistakes?

• UK sellers assuming the marketplace handles their VAT. For sellers established in the UK selling goods already in the UK, section 5A does not apply. The seller accounts for its own VAT once over the £90,000 VAT registration threshold.
• Valuing items, not consignments. The £135 test applies to the whole consignment.
• Overseas sellers not registering. Exemption from registration must be applied for; it is not automatic.
• Flat Rate Scheme errors. Sales where the marketplace is liable for the VAT are excluded from a seller’s Flat Rate Scheme turnover; see the VAT Flat Rate Scheme.
• Ignoring platform reporting. Marketplaces also report seller income to HMRC; see digital platform reporting.

Sellers whose goods ship straight from an overseas supplier should also read dropshipping and VAT.

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Related Accountapedia entries

• Duty and VAT on gifts and parcels sent to the UK
• Selling goods to EU customers after Brexit
• Fulfilment House Due Diligence Scheme
• Postponed VAT accounting on imports
• VAT on sales to the Channel Islands and Isle of Man

Sources

• GOV.UK: Vat and overseas goods sold to customers in the uk using online market
• legislation.gov.uk: Act 1994 c. 23, section 5A
• legislation.gov.uk: Act 1994 c. 23, section 7
• GOV.UK: Vat overseas businesses using an online marketplace to sell goods in t
• GOV.UK: Vat notice 7001 should i be registered for vat
• GOV.UK: Vat online marketplace seller checks
• legislation.gov.uk: Act 1994 c. 23, section 77B
• legislation.gov.uk: Act 1994 c. 23, section 77C
• GOV.UK: Vat and overseas goods sold directly to customers in the uk
• GOV.UK: Vat charities

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.