Online marketplace VAT proposals strike right balance

29 Jun 2026

The government's preferred proposal in HMRC's consultation into VAT compliance should close a tax loophole while protecting small businesses, says the Federation of Small Businesses (FSB).

The business group was commenting on the impact the consultation could have on the online marketplace sector.

The government's preferred option for collecting VAT from sales on online platforms is to exclude businesses with sales of under £90,000 per year.

Craig Beaumont, Executive Director at the FSB, said: 'We hope that this will strike the right balance between addressing a tax loophole and protecting small businesses.

'Independent retailers and online entrepreneurs below the £90,000 VAT threshold are protected from significant red tape, and this must be maintained as ever more commerce happens online. 

'We believe the government's preferred proposal will protect this group and are pleased it has considered the smallest players. It is especially important for many who are engaging with entrepreneurship for the first time through online platforms.

'As HMRC takes its work further, it must be crystal clear on its justification for any intervention that carries cashflow benefits to large players at the expense of small firms. The tax authority should be mindful of the importance of neutrality in the marketplace and the risk of developing a reputation for naivety and capture when making new interventions.'