John Healey is reportedly preparing a tax crackdown on online marketplaces such as Amazon and eBay that could raise up to £1 billion for the Treasury in his first budget, due on 28 October. The chancellor is said to be planning to make platforms responsible for collecting VAT owed by retailers selling on them, with the proceeds used to fund cuts to business rates for high street shops.
According to the Times, the measures would target foreign retailers that have taken advantage of a lack of robust rules and enforcement to avoid paying VAT on their sales. Online marketplaces would be made responsible for collecting VAT at source for all retailers on their platform with an annual turnover of more than £90,000.
The development comes as pressure continues to grow on the government to provide relief to struggling small businesses on the high street before the budget, following a pre-election pledge to raise the business rates threshold so that 140,000 small high street retailers would not pay the tax. The government faces calls from many factions to cut tax.
The budget arrives against a difficult fiscal backdrop. This week the Institute for Fiscal Studies warned that the budget risks being a “work of fiction” unless Healey sets out plans to cover £35 billion in spending pressures. The IFS said the damage from higher inflation meant the chancellor would need to either top up funds for current government spending plans or impose deep real-terms cuts by the end of the decade.
In a boost for the Treasury, the International Monetary Fund this week upgraded its GDP growth forecast for the UK this year to 1.3%, up 0.3 percentage points from its July update. However, the IMF also cautioned that Healey should “stay the course” and continue repairing the UK’s public finances. Silvana Tenreyro, the IMF’s economic counsellor, said the UK “stands out” among G7 countries in having a plan to narrow its deficit.
A Treasury spokesperson said: “As has always been the case, decisions on tax are a matter for the chancellor to set out at fiscal events rather than routinely commenting on rumour, speculation or proposals.”
Analysis
Why This Matters
- The change would shift VAT collection responsibility onto online marketplaces for retailers above the £90,000 turnover threshold, a structural shift in how e-commerce tax is enforced in the UK, with up to £1 billion at stake.
- The revenue is earmarked for business rates relief, directly linking the treatment of foreign online sellers to support for high street shops ahead of the budget on 28 October.
- The budget is being delivered against an IFS warning that the chancellor must credibly address £35 billion in spending pressures.
Background
The UK has long debated how to level the playing field between online platforms and physical retailers, with business rates repeatedly criticised as a burden on the high street. The reported plan extends a broader international push to hold platforms accountable for activity on their marketplaces, after years of complaints that overseas sellers can undercut UK businesses by avoiding VAT.
Key Perspectives
Chancellor and Treasury: The plan would let Healey fund high street relief without raising taxes on most UK businesses. The Treasury said decisions on tax are a matter for the chancellor to set out at fiscal events, rather than commenting on rumour or speculation.
Online marketplaces and sellers: Amazon and eBay would face new compliance duties, collecting VAT at source for platform retailers above the threshold. The stated target is foreign retailers avoiding VAT, but the administrative burden would fall on the platforms themselves.
Fiscal watchdogs: The IFS warns the budget risks being a “work of fiction” unless the chancellor covers £35 billion in spending pressures, either by topping up funding or accepting deep real-terms cuts. The IMF, despite upgrading UK growth, urges Healey to “stay the course” on repairing public finances.
What to Watch
- The budget on 28 October, when the VAT collection plan and any business rates changes will be confirmed or dropped.
- Whether the government responds to the IFS warning with additional funding or deep spending cuts.
- Any pushback from Amazon, eBay or seller groups that could soften the proposals before delivery.