On your own website, you account for VAT on every sale. On a marketplace, the platform accounts for VAT on some sales, mainly imports worth £135 or less and UK-held goods sold by overseas sellers. Your registration duty depends on whether you are UK-established or an overseas seller.
This matters more than most online sellers realise. The assumption that VAT is a flat 20% charge on sales above a threshold breaks down quickly once a business operates across more than one channel, sells into multiple countries, or stores stock in a location different from where the business itself is based.
This article sets out how VAT works across both channels, your own website and third-party marketplaces, covering who is responsible for the VAT on each sale, when registration is required, and what changes when you sell to customers outside the UK. This article does not cover EU VAT rules such as OSS or IOSS, VAT penalties, or compliance checks; these are separate topics with their own frameworks.
Key takeaways
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Selling method
VAT on online sales in the UK is not determined solely by what you sell; it is also determined by how you sell it, which channel you use, and where your business is based.
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Website sales
When you sell through your own website, you are the VAT supplier on every transaction; there is no platform to step in and handle any part of that obligation on your behalf.
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Marketplace VAT
When you sell through a marketplace, the platform can become the deemed supplier on qualifying transactions under VAT Act 1994 s.5A, charging and remitting VAT to HMRC directly instead of you.
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Exceptions
The deemed supplier rule does not apply to every marketplace sale; high-value consignments over £135, excise goods, and B2B sales with a valid VAT number remain the seller's responsibility.
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Overseas sellers
An overseas seller with no UK establishment must register for UK VAT from their very first sale through their own website; there is no £90,000 threshold for a non-established taxable person.
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Dual channels
Running both a website and a marketplace simultaneously means two different sets of VAT rules feeding into the same quarterly return.
What counts as an online marketplace for VAT?
HMRC treats a platform as a marketplace only if it sets the sale terms, is involved in payment, and is involved in ordering or delivery. Add an H3 “Is Shopify, WooCommerce or Etsy a marketplace?”, answering that your own store is your own website. This targets the COPA-style query.
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Do I need to register if I only sell through a marketplace?
Cover that UK-established sellers count gross sales across all channels, overseas sellers with UK stock must register or apply for exemption, and the first-sale rule. Davis LLP and 1StopVAT both answer this.
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Could marketplace VAT rules change?
HMRC and HM Treasury consulted on extending marketplace liability to UK-based sellers' B2C sales. VAT Update reports the consultation closed on 18/08/2026 and responses are under review. If adopted, the sale would be zero-rated between seller and marketplace, and own-website sales would be unaffected. Label it clearly as a proposal, not law, link to the GOV.UK consultation page, and diary an update for when HMRC responds.
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VAT on marketplace fees
Fees billed by a UK entity usually carry UK VAT, and fees from an overseas entity usually fall under the reverse charge. COPA covers this and it's a common follow-up question.
Who accounts for VAT on online sales in the UK?
Three simple points decide most of the VAT differences between selling on your own website and selling through a marketplace. Each is covered in more detail later in this article.
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UK-established business
Your business is run from the UK, for example you have an office or staff here, or key management decisions are made here. UK-established sellers only need to register for VAT once taxable turnover passes £90,000.
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Overseas seller (NETP)
A business based outside the UK with no UK establishment is called a non-established taxable person, or NETP. There is no £90,000 threshold, so registration is needed from the first taxable sale to a UK customer. See our guide: HMRC VAT Rules for NETPs.
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Where your stock is
If your goods are already in the UK when a customer orders them, it is a UK sale and UK VAT applies. Goods shipped in from overseas can be treated differently.
Two sellers selling the same product can therefore end up with different VAT positions, depending on the channel they use, whether they are established in the UK, and where their stock is held.
What Are the VAT Rules When You Sell Through Your Own Website?
When you sell through your own website, there is no intermediary between you and the customer. Every sale is your sale, every VAT obligation is your obligation, and nothing about the channel shifts any part of that responsibility elsewhere. The rules that apply depend on where your business is established, what you are selling, and how much you are turning over, but the starting point is always the same: you are the supplier, and the VAT position begins and ends with you.
Selling From the UK: When the £90,000 Threshold Applies
If your business is established in the UK, you are not required to register for VAT until your taxable turnover exceeds £90,000 in any rolling twelve-month period. HMRC looks at the most recent twelve months at any given point, not the calendar year or your financial year. Once you cross that figure, you must notify HMRC within 30 days.
There is also a forward-looking test: if you have reasonable grounds to believe your turnover will exceed £90,000 in the next 30 days alone, you must register immediately, even if your sales to date have not yet hit the threshold. Below that figure, registration is optional; there is no legal obligation to do so.
For a seller operating exclusively through their own website, every sale counts toward that threshold, provided the sale is a taxable supply made in the UK. Sales that are exempt or outside the scope of UK VAT do not count, but for most sellers of physical goods to UK consumers, the threshold is a straightforward running total of revenue.
Selling Direct from Overseas: The NETP Position
A business may be a non-established taxable person, an NETP, where both of the following apply:
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the business is making, or intends to make, taxable supplies in the UK; and
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those supplies are made in the course or furtherance of a business.
If both of the above apply and you have no business establishment or fixed establishment in the UK (for example, no office, no staff, and no place where management decisions about the business are made), you are an NETP under VAT Act 1994 Sch 1A, and the standard £90,000 registration threshold does not apply.
There is no registration threshold for an NETP. Where a UK-established business can trade up to £90,000 before VAT registration becomes compulsory, an overseas seller with no UK establishment must register from their very first taxable sale to a UK customer.
This catches a significant number of overseas sellers who assume the threshold applies to them in the same way it does to UK businesses. It does not. The moment a sale is made to a UK customer through your own website and the goods are either already in the UK or shipped from overseas, the registration obligation exists, and it existed from the date of that first sale, not from the date you became aware of it.
What Are the VAT Implications When You Sell to Customers Outside the UK?
Selling to customers outside the UK does not automatically remove your VAT obligations; it changes them. The VAT treatment of a cross-border sale depends on what you are selling, where the goods are at the point of sale, and whether the customer is a consumer or a business. And critically, how those rules apply in practice differs significantly depending on whether the sale goes through your own website or a marketplace.
Exporting Goods to Overseas Customers: The Zero-Rating Conditions
When you sell physical goods to a customer outside the UK, and those goods leave the UK, the sale can generally be zero-rated for UK VAT purposes. Zero-rating means VAT is charged at 0% rather than 20%, which is not the same as the sale being outside the scope of VAT entirely. You still need to be VAT-registered, you still need to report the sale, and you still need to hold evidence that the goods left the UK.
On your own website, zero-rating an export is entirely your responsibility. You apply the zero rate at the point of sale, and you retain the export evidence, commercial invoices, freight documents, and proof of delivery outside the UK. The goods must leave the UK within three months of the date of sale, and you must hold the evidence confirming they did so within that same three-month window. If HMRC raises a question and the evidence is missing or inadequate, they can disallow the zero-rating and assess VAT at 20% on those sales.
On a marketplace, the position is different for sales that fall within the deemed supplier rules. Where the marketplace is accounting for VAT on the sale, the platform handles the VAT treatment of that transaction. But for sales outside the deemed supplier scope, for example, high-value consignments shipped from outside the UK, the export evidence obligation still sits with the seller. The marketplace being involved does not remove the seller’s responsibility to hold the right documentation for those transactions.
Selling Digital Products to Overseas Consumers: Where the VAT Goes.
If you sell digital products through your own website, downloads, software, online courses, or streaming content to consumers outside the UK, the place of supply rules work differently from physical goods. For digital services sold to consumers, VAT is generally due in the country where the consumer is located, not where the seller is based. This follows the place of supply rules under VAT Act 1994 s.7A and Schedule 4A, which treat digital services supplied to consumers as made in the country where the consumer is located rather than where the supplier is based. That means a UK-established seller selling a digital download to a consumer in France may have a French VAT obligation, not a UK one.
This is where the website vs marketplace contrast is most pronounced. If you sell the same digital product through a marketplace like Amazon or Etsy, the platform typically handles the overseas VAT obligations on your behalf, registering in the relevant countries and accounting for the local VAT under their own arrangements. The seller sees none of that complexity. Selling direct through your own website, however, means that complexity lands entirely with you. Many sellers do not realise this difference exists until they have already been selling into multiple countries for some time without registering where they should have.
For UK sellers selling digital services to UK consumers, the standard UK VAT rules apply: 20% once registered, reportable on your UK return in the normal way.
What Changes When Your Overseas Customer Is a Business?
When the overseas customer is a VAT-registered business rather than a consumer, the VAT treatment depends on whether you are selling goods or services. For goods exported to an overseas business customer, the supply is zero-rated by the UK seller, no VAT is charged, and no reverse charge applies on the UK side. For services supplied to an overseas business customer, the reverse charge mechanism typically applies. This shifts the VAT accounting obligation from the seller to the buyer; the buyer accounts for the VAT in their own country under their own registration, and the seller makes the supply without charging UK VAT. The practical effect is that a B2B cross-border sale is generally cleaner from a UK VAT perspective than a B2C one.
On your own website, applying the reverse charge correctly requires you to verify that the customer is actually a business and obtain their VAT registration number before treating the sale as outside the scope of UK VAT. Selling to someone who claims to be a business without proper verification and then applying the reverse charge incorrectly is a VAT risk that sits entirely with the seller.
On a marketplace, the platform typically handles the verification of business customer status on qualifying transactions, requesting VAT numbers at the point of purchase and adjusting the VAT treatment accordingly.
When Does Selling Through a Marketplace Change Who Accounts for VAT?
When you sell through a marketplace, you are not always the party responsible for the VAT on that sale. In certain circumstances, the marketplace itself becomes the deemed supplier, meaning it charges the VAT to the customer and remits it to HMRC directly, rather than you doing so. This is not a choice the seller makes or an arrangement that can be opted in or out of. Where the conditions are met, the deemed supplier rule applies automatically.
The rules governing when this happens are set out in VAT Act 1994 s.5A, introduced from 1 January 2021 following the end of the UK’s Brexit transition period. Two separate conditions can trigger the deemed supplier rule, and they operate independently of each other.
The First Condition: Low-Value Imports of £135 or Less
The first condition is triggered by the goods themselves rather than by who the seller is. Where a consignment is shipped from outside the UK directly to a UK customer, and the total value of that consignment is £135 or less, the marketplace becomes the deemed supplier on that sale. This applies regardless of whether the seller is UK-established or based overseas; the only variables that matter are where the goods are shipped from and what the consignment is worth.
The £135 threshold applies to the total value of the consignment, not to individual items within it. Three items worth £50 each shipped together in one parcel exceed the threshold even though no single item does.
The Second Condition: UK-Stored Goods Sold by an Overseas Seller
The second condition is triggered by the seller’s establishment status rather than the value or origin of the goods. Where goods are already located in the UK at the point of sale, for example, stock held in an Amazon FBA warehouse and the seller has no UK establishment, the marketplace becomes the deemed supplier on that sale. The value of the goods does not matter here. A £5 item and a £5,000 item are treated identically if both are in UK stock and the seller is overseas.
For a seller operating through their own website with UK-held stock, this condition again does not apply. The deemed supplier rule is specific to marketplace transactions. An overseas seller holding stock in a UK warehouse and fulfilling orders through their own website remains responsible for the VAT on every one of those sales; there is no platform to step in and take on the liability.
HMRC’s guidance on how these rules apply to overseas sellers using online marketplaces is set out in VATREG37210.
What the Deemed Supplier Rule Does Not Cover?
The deemed supplier rule does not apply to every marketplace sale. It does not apply where:
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the goods are imported and the consignment is worth more than £135; those sales remain the seller's VAT responsibility, whatever the channel;
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the goods include excise duty items such as alcohol, tobacco or fuel, regardless of value; or
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the buyer is a UK VAT-registered business that gives a valid VAT number at the point of purchase; the deemed supplier rule is switched off and the B2B rules apply instead.
What Happens When You Sell Through Both a Website and a Marketplace?
Many online sellers do not operate through a single channel. A business might run its own Shopify store alongside an Amazon FBA operation or sell through eBay while also taking direct orders through its own website. When that is the case, the VAT rules that apply to each channel run in parallel, and they do not always point in the same direction.
The starting point is that each channel is assessed independently. A sale through your own website follows the direct-seller rules regardless of what is happening on your marketplace account, and a marketplace sale is assessed against the deemed supplier conditions regardless of your website activity. The two channels do not interact for VAT purposes, but they do both feed into the same VAT return, which is where the complexity of managing a mixed-channel business becomes practical rather than theoretical.
How Do You Work Out Which Sales the Marketplace Accounts For?
Not every marketplace sale falls under the deemed supplier rule, and not every website sale is treated identically either. Before you can complete your VAT return accurately, you need to identify which of your marketplace sales the platform has accounted for VAT on, which remain your responsibility, and how your website sales sit alongside both.
Most marketplaces provide transaction-level reporting that identifies which sales were processed under the deemed supplier rules and which were not. Amazon’s VAT transaction reports, for example, distinguish between sales where Amazon has collected and remitted the VAT and sales where the obligation remains with the seller. Building a reconciliation process around that data, rather than treating all marketplace income as equivalent, is the practical foundation of VAT compliance for a mixed-channel business.
What Does the VAT Return Actually Look Like Across Both Channels?
When it comes to filing, all your VATable activity feeds into a single VAT return regardless of how many channels you sell through. The return does not have separate sections for website sales and marketplace sales; everything is aggregated into the same nine boxes. How each type of sale is treated within those boxes, however, differs by channel and applicable rules.
Sales through your own website where you have charged VAT go into Box 1 as output tax and Box 6 as the net value of sales. Marketplace sales where the deemed supplier rule applies, and the platform has accounted for the VAT, are not output tax for you, but the value of those sales may still need to be reflected in Box 6 depending on which condition triggered the deemed supplier rule, as set out earlier in this article. Sales to overseas customers that are zero-rated go into Box 6 but not Box 1. Getting these distinctions right across multiple channels on a single return is where most mixed-channel sellers run into problems.
Worked Example: A Mixed-Channel Seller's VAT Position
A seller based in the United States has no office, staff or operational base in the UK. They sell the same product through two channels, an online marketplace where their stock sits in a UK warehouse, and their own website, where orders ship directly from the US to UK customers in parcels under £135.
Here is the breakdown at a glance:
The same seller, selling the same product to the same type of customer, has two entirely different VAT positions running in parallel, purely because of the channel they use. The marketplace channel creates no VAT remittance responsibility for the seller. The own website channel places the full VAT obligation on the seller for every transaction. Both channels feed into the same quarterly VAT return, but the inputs from each are treated differently within that return.
These figures are illustrative. The correct VAT treatment depends on your specific facts, including the nature of your supplies, your establishment status, and the conditions applicable to each channel.
What Are the Most Common VAT Mistakes Online Sellers Make Across Both Channels?
VAT errors among online sellers rarely come from a complete misunderstanding of the rules. They more often come from applying the right rule to the wrong situation, assuming that what applies on one channel carries over to the other, or that a platform handling some of the VAT means the seller’s obligations have been dealt with entirely. These are the mistakes that appear most consistently across both channels:
Not Adjusting When a New Channel Is Added
A seller who adds a new sales channel, moving from marketplace-only to also selling direct through their own website, or vice versa, often does not review their VAT position at the point of that change. Adding an own website channel to an existing marketplace operation can create a registration obligation that did not previously exist, change the Box 6 reporting requirements, and introduce new export and B2B VAT questions that the marketplace was previously handling invisibly. The VAT position needs to be reviewed every time the channel mix changes, not just at the point of initial setup.
Assuming the Marketplace Covers Everything
The most common mistake is treating all marketplace income as VAT-handled because the platform collects VAT on some sales. The deemed supplier rule has exceptions (see above), and on those sales the VAT stays with the seller. A seller who files a return omitting those transactions on the basis that “Amazon handles our VAT” is making a careless inaccuracy that HMRC can assess and penalise.
Misclassifying Overseas Sales as VAT-Exempt
Selling to a customer outside the UK through your own website does not automatically mean no VAT obligation. Whether the sale is zero-rated, outside scope, or standard-rated depends on what is being sold, where the goods are at the point of sale, and who the customer is. Physical goods exported to non-UK customers can generally be zero-rated, but only with the right export evidence in place. Digital services sold to overseas consumers may trigger VAT obligations in the customer’s country. Assuming the answer without checking it is where exposure builds up quietly over time.
FAQ Section
The £90,000 threshold applies only to UK-established businesses. A seller with no genuine UK base must register from their very first taxable sale to a UK customer; there is no threshold to grow into.
Not necessarily. VAT on digital services is generally due where the consumer is located; selling directly through your own website can create registration obligations in those countries that a marketplace would otherwise handle for you.
No, it applies only to marketplace sales. When you sell through your own website, you are always the VAT supplier on every transaction.
Not the VAT itself. Where the marketplace accounts for the VAT, you do not pay it again on your own return. However, the value of some of those sales may still need to be shown in Box 6 (total value of sales), depending on which condition applied. For example, where an overseas seller’s goods are already in a UK warehouse, the seller’s sale to the marketplace is zero-rated and is reported in Box 6. Check how each type of sale is treated before you file.
Adding a new channel can change your registration position and the VAT treatment of your sales in ways that are not always obvious. Getting advice from a professional VAT adviser before you launch is simpler and cheaper than trying to correct mistakes after HMRC raises a question.
Conclusion
The VAT rules that apply to online sales in the UK go beyond what you are selling. The same product, sold to the same customer, can carry a completely different VAT treatment depending on whether the sale goes through your own website or a marketplace, where the goods are at the point of sale, and where your business is based.
What makes this genuinely complicated for most online sellers is not any single rule in isolation. It is the combination of rules running in parallel across channels that do not interact for VAT purposes but do feed into the same return. A seller operating across both a marketplace and their own website needs to understand both frameworks, and where they differ, before they can be confident their VAT position is correct.
If you are expanding into the UK market, adding a new sales channel, or unsure whether your current VAT treatment across both channels is correct, taking specialist advice before the next quarterly return is due is the most practical next step.
Question about VAT on Online Sales?
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