HMRC and the Treasury yesterday (23 June) launched a consultation on extending online marketplace VAT liability rules to cover sales made by UK businesses through online platforms.
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The proposals would make online marketplaces responsible for accounting for VAT on more goods sold by UK businesses to consumers through their platforms.
The consultation includes online takeaway food delivery platforms, as well as restaurants, fast food kitchens and takeaway outlets that use those platforms.
The Government said any revenue raised from the reforms would be used to support improvements to the business rates system for high street businesses, including pubs, restaurants and hotels.
The consultation will run for eight weeks, from 23 June to 18 August 2026.
‘Level playing field’
UKHospitality said the plans could be a positive step if the additional revenue is used to meaningfully lower business rates for hospitality businesses most affected by recent increases.
Hotels and restaurants faced some of the most significant rises following the most recent business rates revaluation, with three year increases of 115% and 54% respectively.
UKHospitality chair Kate Nicholls said: “The Government committed to level the playing field between the high street and online giants, and it’s clear much more needs to be done to achieve that goal.
“We have been clear in our continuous engagement with the Government since the Budget that we need to see concrete action to lower business rates for those businesses most affected.
“Hotels and restaurants faced the most significant increases in April and pubs, cafes, and many more also continue to suffer from the broken businesses rates system.”
She added: “It’s right that any revenue raised from more effectively taxing online giants should be used to support hospitality businesses and I look forward to working with the Government on its proposals.”
VAT compliance
The Government said existing reforms introduced in 2021 had improved VAT compliance among overseas businesses selling through online marketplaces, but non compliance remained an issue among both overseas and UK based sellers.
The consultation said VAT non compliance in the delivered hot food sector was a particular issue, with hundreds of millions of pounds estimated to be lost annually.
It said businesses failing to pay the correct tax were able to undercut compliant operators, including those on the high street.
The Government is seeking views on how the policy should be designed, including options to reduce the impact on smaller UK businesses that are not required to register for VAT.
A formal response will be published after the consultation closes.
