VAT on online marketplace seller fees

Q: How does this work in practice?

Illustration only. A VAT registered seller of homeware has a quarter in which: a marketplace bills £3,000 of selling fees from a company established outside the UK, with no VAT shown, deducted from payouts; an advertising platform bills £1,000 of advertising from an establishment outside the UK; a UK courier service charges £500 plus £100 VAT. The seller adds £800 (20% of £4,000) to box 1 and claims £900 in box 4 (the £800 reverse charge plus the £100 charged by the courier). Box 6 includes £4,000 for the deemed supply on top of the seller's own sales, and box 7 includes £4,500 of purchases. Now take an unregistered seller in the same position with £82,000 of sales over the last 12 months and £10,000 of reverse charge fees and advertising in that period. Taxable turnover for the threshold is £92,000, so the seller has gone over the threshold and must register within 30 days of the end of that month, even though its sales alone were below it. Missing this can lead to a late registration penalty.

Selling fees, subscription fees and advertising charged to a UK business seller are normally supplied where the seller belongs, so they are within UK VAT. If the platform bills them from an establishment outside the UK, a VAT registered seller must account for the VAT itself under the reverse charge, putting the same amount in box 1 and box 4 of the VAT return; if a UK establishment bills them with UK VAT, the seller reclaims that VAT in the normal way. Sellers who are not registered must count reverse charge fees towards the £90,000 registration threshold.

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Why are fees from an overseas platform within UK VAT?

VAT Notice 741A, paragraph 6.3, sets the general rule for business to business services: the supply is made where the customer belongs. A UK seller paying a platform for listing, selling, fulfilment management or advertising services is the customer, so the place of supply is normally the UK even when the platform company is abroad. Paragraph 6.1 says the special rules in paragraph 6.4 must be checked first; they cover things such as property related services, transport, events and catering, and do not usually reach a seller’s marketplace or online advertising fees.

Section 8 of the VAT Act 1994 then shifts the duty to account for the VAT. Notice 741A, paragraph 5.1, says the reverse charge applies where the place of supply is the UK, the supplier belongs outside the UK, the customer belongs in the UK and the supply is not exempt. The customer acts as both supplier and recipient. The general mechanics are covered in the reverse charge on services from abroad; this page deals with how it applies to selling platforms.

How do I tell whether the reverse charge applies to my fees?

The question is which establishment of the platform supplies the service, not where the platform’s brand is based. Large platforms often bill UK sellers from different group companies, and that can change, so check the supplier name and address on each invoice or fee statement.

Billed by an establishment in the UK, with UK VAT shown. A UK supplier charges VAT in the normal way and the seller reclaims it as input tax with a valid invoice.
Billed by an establishment outside the UK, with no VAT. The seller applies the reverse charge.
Billed from abroad but showing a UK VAT number or UK VAT. Paragraph 5.1 says the reverse charge applies if the supplier belongs outside the UK even if it has a UK VAT registration number, and paragraph 5.17 says the reverse charge is not optional: the seller should still apply it and ask the supplier to correct the invoice.

Where a supplier belongs is set out in paragraphs 3.2 to 3.5. A supplier belongs in the UK if it has its business establishment here, or a UK fixed establishment with the human and technical resources most directly connected with the supply. Paragraph 3.5 lists things that do not create a fixed establishment, including computer servers alone and a UK VAT registration without supporting resources in the UK.

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How do the fees go on the VAT return?

Notice 741A, paragraph 5.2, and Notice 700/12, paragraph 4.6, set out the boxes for a customer using the reverse charge on international services:

Box	What goes in
Box 1	VAT on the fees at the UK rate, as output tax
Box 4	The same VAT as input tax, to the extent you are entitled to reclaim it
Box 6	The full value of the fees, as a deemed supply
Box 7	The full value of the fees, as a purchase

Paragraph 5.12 says the value is the total amount paid plus the value of any other consideration, including any taxes levied abroad. Fees deducted from payouts are still paid; the platform has simply taken them out of the money due to you, so use the full fee from the statement rather than working back from the net payout. Your own sales go in box 6 at their full value as normal. Fees in a foreign currency are converted to sterling under the rules in Notice 700.

Does the reverse charge cost a seller anything?

For most sellers, no. Paragraph 5.4 says that if the input tax can be attributed to taxable supplies and reclaimed in full, the reverse charge has no net cost. A trader selling standard rated or zero rated goods is fully taxable, so box 1 and box 4 cancel out. It only becomes a real cost where the seller also makes exempt supplies and is partly exempt. The entries still have to be made: leaving them out understates boxes 1, 4, 6 and 7 and can be picked up in a VAT compliance check.

What if I am not VAT registered?

This is where marketplace fees most often cause trouble. Notice 741A, paragraph 5.7, says a UK business that is not registered and receives general rule services from overseas suppliers must add their value to its own taxable supplies when deciding whether it must register. GOV.UK’s registration guidance lists services received from businesses in other countries that had to be reverse charged as part of taxable turnover.

The threshold is £90,000 of taxable turnover in the last 12 months, or an expectation of exceeding £90,000 in the next 30 days alone. A seller whose sales alone stay under the threshold can be pushed over it by overseas fees and advertising. See the VAT registration threshold and the rolling 12 month test.

Paragraph 5.10 draws a contrast with services that fall under the special rules, such as UK property related services from an overseas supplier: for an unregistered customer those do not count towards the threshold and the supplier accounts for any UK VAT. That exception does not normally help with marketplace fees, which follow the general rule.

How does the Flat Rate Scheme deal with reverse charge fees?

Notice 733, paragraph 6.4, says services bought from outside the UK to which the reverse charge applies are dealt with outside the Flat Rate Scheme. They are left out of flat rate turnover but recorded in boxes 1 and 4 as under normal accounting. Notice 700/12, paragraph 4.1, adds that a flat rate business includes reverse charge transactions in box 6 and box 7. Applying the flat rate percentage to the fees, or ignoring them, are both errors. See the VAT Flat Rate Scheme.

How does this work in practice?

Illustration only. A VAT registered seller of homeware has a quarter in which:

a marketplace bills £3,000 of selling fees from a company established outside the UK, with no VAT shown, deducted from payouts;
an advertising platform bills £1,000 of advertising from an establishment outside the UK;
a UK courier service charges £500 plus £100 VAT.

The seller adds £800 (20% of £4,000) to box 1 and claims £900 in box 4 (the £800 reverse charge plus the £100 charged by the courier). Box 6 includes £4,000 for the deemed supply on top of the seller’s own sales, and box 7 includes £4,500 of purchases.

Now take an unregistered seller in the same position with £82,000 of sales over the last 12 months and £10,000 of reverse charge fees and advertising in that period. Taxable turnover for the threshold is £92,000, so the seller has gone over the threshold and must register within 30 days of the end of that month, even though its sales alone were below it. Missing this can lead to a late registration penalty.

What mistakes come up most often?

Ignoring fees with no VAT on them because “there is no VAT to claim”.
Reclaiming VAT shown on an invoice from an overseas billing entity instead of applying the reverse charge.
Recording sales at the net payout figure after fees have been deducted.
Leaving reverse charge fees out of the registration threshold calculation.
Assuming every invoice from a platform comes from the same entity.
Including reverse charge fees in flat rate turnover.

For the separate rules where a marketplace is itself liable for VAT on goods sold by overseas sellers, see online marketplaces and overseas sellers.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.