The two rules that decide who collects UK VAT
Since 1 January 2021 (post-Brexit), UK rules say a marketplace is deemed to be the seller for VAT purposes, meaning the marketplace collects and remits VAT directly to HMRC, in exactly two scenarios:
- Goods located outside the UK at the point of sale, regardless of value. (The old £15 low-value threshold was abolished.)
- Goods located in the UK and sold by a non-UK-established seller.
If neither of those applies, i.e. you're a UK-established seller with UK-located stock, you remain responsible for VAT. The marketplace just processes the payment.
The HMRC guidance is at gov.uk/vat-and-overseas-goods. The rules cover Amazon UK, eBay UK, Etsy UK, TikTok Shop UK, and any other "online marketplace" as defined by HMRC.
Scenario 1: UK seller with UK stock
This is the default scenario for most UK ecommerce sellers, you operate a UK Ltd or sole trader business, hold stock in a UK warehouse (your own, a 3PL like Huboo or Whistl, or Amazon FBA UK), and sell to UK consumers via Amazon, eBay, Etsy, etc.
Who collects VAT? You do. The marketplace is just a payment platform.
Practical implications:
- You're VAT-registered (or above the £90,000 threshold and should be), you charge VAT on your sales, file VAT returns, and pay HMRC.
- The marketplace's payout to you is gross of VAT. If you sell something for £120 inc VAT, Amazon pays you £120 (less platform fees); you owe HMRC the £20 VAT element.
- You set the VAT rate on your listings via Seller Central / equivalent (standard 20%, reduced 5%, zero-rated). Most products are standard-rated.
- Customs / import VAT is your responsibility for any inventory you bring in. Postponed VAT Accounting helps the cash flow.
Scenario 2: UK seller with overseas stock
You're a UK-established seller, but your stock is held outside the UK at the moment of sale, e.g. you're using a US 3PL to fulfil UK orders, drop-shipping from a Chinese supplier, or using Amazon Pan-European FBA where stock has been moved to a German warehouse.
Who collects UK VAT? The marketplace, on any consignment value. They charge the buyer UK VAT and remit it directly to HMRC.
You don't account for that VAT on your VAT return, Amazon/eBay handle it. But you do need to:
- Tell Amazon (or whichever marketplace) the goods are overseas so they apply the right tax treatment.
- Watch out for the destination-country VAT implications, if your stock moves through an EU FBA centre, you may have EU VAT registration obligations even though Amazon handles the end-customer VAT.
- Account for any import VAT charged at the UK border on inbound shipments to your UK warehouse (typically reclaimed via PVA).
The biggest trap here is Pan-European FBA stock movements, see that guide for the deep dive.
Scenario 3: Non-UK seller selling into the UK
If you're not UK-established (i.e. your business is incorporated outside the UK with no UK fixed establishment), the rules are stricter:
- If your stock is overseas at point of sale: the marketplace collects UK VAT.
- If your stock is in the UK at point of sale: the marketplace still collects UK VAT. This was the big rule change of 2021, non-UK sellers with UK-located stock no longer self-collect, even though previously they did.
Non-UK sellers who store inventory in the UK (e.g. using Amazon FBA UK from a US-based business) need a UK EORI number for customs, but the marketplace handles VAT on the sales themselves. The non-UK seller can still register for UK VAT to reclaim input VAT (import VAT, marketplace fees inclusive of VAT, etc.) if it makes commercial sense.
How it plays out per marketplace
| Marketplace | UK seller, UK stock | UK seller, overseas stock | Non-UK seller |
|---|---|---|---|
| Amazon UK | You charge + remit VAT | Amazon collects + remits | Amazon collects + remits |
| eBay | You charge + remit VAT | eBay collects + remits | eBay collects + remits |
| Etsy | You charge + remit VAT | Etsy collects + remits | Etsy collects + remits |
| TikTok Shop | You charge + remit VAT | TikTok collects + remits | TikTok collects + remits |
| Shopify (your own store) | You charge + remit VAT | You charge + remit VAT | You charge + remit VAT (or use IOSS for EU customers, see OSS/IOSS guide) |
Shopify and other own-store platforms are not marketplaces under the HMRC definition, they're software you use to run your own shop, so the deemed-supplier rules don't apply. You're always the VAT-responsible party for own-store sales.
The five most common marketplace VAT mistakes
- Double-counting marketplace-collected VAT. Some sellers include their Amazon-collected EU sales as output VAT on their UK VAT return, then Amazon also remits it, paying twice. Marketplace-collected VAT is excluded from your own VAT return entirely.
- Missing EU VAT registrations. Pan-European FBA moves your stock to Germany, France, etc. Amazon handles the EU consumer VAT, but you may still owe VAT registration in the destination country for "movement of own goods" purposes. See the FBA stock movements guide.
- Treating Shopify like a marketplace. Shopify is your own store, you're always the VAT-responsible party. The deemed-supplier rules don't apply.
- Wrong VAT rates set on listings. Standard-rated products listed as zero-rated, or vice versa. Children's clothing, books, food are zero-rated; everything else is usually standard 20%.
- Ignoring the £85k → £90k threshold update. The VAT registration threshold rose to £90,000 on 1 April 2024 and stays at £90,000 for 2025/26. Plenty of accountants still quote £85k.