The Budget confirmed a marketplace VAT extension, set out a roadmap for mandatory e-invoicing and announced a change to the reverse charge for services from overseas. Here is what those decisions mean for your VAT position, and the practical steps to take next.
Marketplace VAT collection is expanding from October 2027
The government’s response to its consultation confirms that, from 1 October 2027, subject to regulations, online marketplaces will be responsible for collecting VAT on qualifying UK business sales of goods to UK consumers where the goods are in the UK at the time of sale.
The rules will cover:
- Sales made by UK VAT-registered businesses, regardless of their sales on that platform.
- Sales by other UK businesses once their annual sales on an individual platform exceed £90,000.
The £90,000 minimum platform threshold is assessed separately for each platform. Personal sales, second-hand goods and business-to-business transactions are excluded. The rules do not provide a separate VAT-rate relief for smaller sellers.
Most importantly, the platform threshold does not replace your own VAT-registration test. If your taxable turnover exceeds the general registration threshold, you may still have to register even if your sales on each individual marketplace remain below £90,000. The UK VAT registration threshold remains £90,000; check the current HMRC registration rules.
The confirmed measure follows speculation about a larger revenue impact. The published Budget figures now estimate an Exchequer gain of £165 million in 2027–28 and £320 million in 2028–29. The government estimates around 100,000 businesses will be affected. The broad direction was anticipated; the start date, exclusions and platform-by-platform threshold are now clearer. Detailed mechanics, including the interaction with the Flat Rate Scheme, will still need to be set out in 2027 regulations and guidance.
Marketplace seller checklist
- Map your sales by platform. Record annual sales for each marketplace separately. This will help you identify where the platform threshold may apply.
- Check your own registration position independently. A platform collecting VAT does not cancel a registration obligation based on your overall taxable turnover.
- Review the effect on your numbers. Model how marketplace VAT collection could affect prices, margins, cash flow and VAT recovery. If you are registered, check how platform-collected VAT will be reflected in your records and VAT return.
- Keep tracking the rules. Watch for 2027 regulations and guidance, especially on threshold calculations, second-hand goods and Flat Rate Scheme treatment.
The core issue is operational: platforms may collect the VAT on qualifying sales, but you still need reliable sales data and accurate records to reconcile marketplace settlements with your accounts.
The e-invoicing roadmap gives businesses a preparation window
HMRC’s roadmap confirms that, from 1 April 2029, VAT-registered persons, including public-sector bodies, will need to be able to issue and receive e-invoices for VAT invoices, unless a specific exemption applies.
An e-invoice is not simply a digital file. It is structured invoice data exchanged directly between financial systems. A PDF, Word document, JPEG, HTML invoice in an email or fax does not count as an e-invoice under the roadmap.
The UK’s core interoperability framework will be Peppol. HMRC is expected to become the UK Peppol Authority, taking over the function currently held by NHS Supply Chain. The Authority will not receive copies of business VAT invoices. Businesses will also need a business identifier as part of their Peppol participant identity; the accepted identifiers are expected to be confirmed between October 2027 and April 2028.
The requirement digitises existing VAT invoicing. It does not change the rules on when a VAT invoice is required or the information it must contain. In general, the mandate relates to VAT invoices required for relevant UK transactions between VAT-registered parties. Consumer sales do not require e-invoices. Cross-border transactions do not require them where a VAT invoice is not required, although you and your overseas customer may agree to use e-invoices voluntarily. Non-established taxable persons are expected to follow the same rules as UK businesses.
Roadmap at a glance
- Spring 2027: Technical consultation on UK e-invoicing standards.
- October 2027 to April 2028: Publication of detailed requirements, including scope, exclusions, standards, business identifiers and service-provider requirements.
- By April 2028: Further details on exemptions and updated guidance; at least 12 months’ notice before implementation.
- 2028: Software-provider readiness work and testing, alongside a government communications campaign.
- 1 April 2029: The e-invoicing requirements take effect.
A separate consultation on e-invoicing digital reporting runs until 20 January 2027. It explores whether invoice data could be used for reporting to HMRC. No decision has been taken to introduce digital reporting.
For now, review how your business sends and receives invoices and talk to your software provider. There is no need to implement a solution before detailed requirements are published. But early research can help you avoid a rushed change later. The roadmap also points to possible efficiencies: structured invoicing can reduce manual handling, and NHS e-invoices have been reported as paid 26 days faster than paper or email invoices.
The overseas-services reverse charge changes on 1 April 2027
From 1 April 2027, the reverse charge for relevant services supplied from overseas will apply only where the UK business receiving the service is VAT-registered.
If your UK business is not VAT-registered, the overseas supplier will instead be required to charge and account for UK VAT where UK VAT applies to the service. That may mean the supplier needs to register for UK VAT, maintain additional records, submit returns and pay VAT to HMRC.
For example, a US SaaS provider selling a UK business a service that is subject to UK VAT may need to charge UK VAT if the UK customer is not VAT-registered. For a UK business below the registration threshold, this could increase the cost of the service because it cannot normally reclaim VAT as input tax while unregistered.
The exact VAT treatment still depends on the service and place-of-supply rules. If you buy services from overseas, or supply services to UK customers from abroad, review the types of service, customer VAT status and invoicing arrangements before the change takes effect. The HMRC policy note explains the reform.
Tribunal watch: keep evidence of important VAT positions
In Abbey Group Ltd v HMRC [2026] UKFTT 1418 (TC), a housebuilder’s appeal against an assessment involving input tax reclaimed on free promotional carpets was dismissed.
The tribunal found it had no jurisdiction to determine the taxpayer’s legitimate-expectation argument under s