The Treasury is preparing to announce that online marketplaces — Amazon, eBay, and potentially food delivery platforms — will be made legally responsible for collecting VAT on all sales above £90,000 annual turnover made through their platforms, regardless of where the seller is based. The change targets a known gap: since 2021, platforms have been required to collect VAT for overseas sellers, but foreign operators have routinely posed as UK-based businesses using shell companies or other techniques to evade the rule. The estimated revenue gain is up to £1bn annually. The money is earmarked to fund cuts to business rates for high street retailers. Before his election in Makerfield, Andy Burnham pledged to raise the business rates threshold so that 140,000 small high street shops would pay nothing. This budget proposal is the mechanism designed to deliver that promise — a direct fiscal transfer from platform-enabled tax arbitrage to bricks-and-mortar retail. Amazon itself has publicly welcomed the change, calling it a loophole closure that will "raise significant revenue for the exchequer and simplify compliance for both HMRC and legitimate sellers." That endorsement is not altruism. Amazon already has the infrastructure to collect VAT at checkout. Smaller marketplaces do not. The compliance burden of becoming a deemed reseller falls disproportionately on mid-tier platforms, which effectively raises the competitive moat around the largest players. The government ran a summer consultation on the deemed reseller rules, explicitly noting that "non-compliance persists among both overseas and UK-based businesses, distorting competition and disadvantaging compliant firms online and on the high street." The inclusion of food delivery platforms in the consultation signals broader ambitions than retail alone — Deliveroo, Just Eat, and similar services may face analogous obligations. The broader fiscal context is severe. The Institute for Fiscal Studies warned this week that Healey's budget risks being a "work of fiction" unless it addresses £35bn in spending pressures. Higher inflation has eroded previous fiscal plans, meaning the chancellor must either find new revenue or impose deep real-terms spending cuts by the end of the decade. A £1bn VAT measure is meaningful but covers less than 3% of that gap. There is a counterbalancing signal: the IMF upgraded UK GDP growth for 2025 to 1.3%, up 0.3 percentage points from July, while commending the UK for "standing out" among G7 nations with a credible deficit-reduction plan. IMF economic counsellor Silvana Tenreyro urged Healey to "stay the course" on fiscal repair. The structural question is whether making platforms the tax collectors transforms the competitive landscape or merely formalises the dominance of those already large enough to absorb compliance costs. For high street retailers, the rate cuts are real relief. For mid-tier online marketplaces, the compliance costs may prove the more consequential policy change.
