Let's be honest: most £1m+ brands cannot tell you whose VAT is whose. Not the amount, not the direction, not whether the platform already paid it.

I sat with a founder last month who runs £1.4m a year across Amazon and TikTok Shop. His accountant had booked the net payouts as sales and the platform fees as a single mystery line. When I asked about the VAT on his own sales, he shrugged and said the platforms account for it. They do not account for the VAT on his UK-stock sales. They may process the customer's VAT-inclusive payment, but the output VAT is his.

Here's the thing that decides everything: when you sell through Amazon or TikTok Shop, the question of who collects the VAT is not a technicality. It decides what goes on your VAT return, what never touches it, and what you are allowed to reclaim. Get the split wrong at seven figures and you are either paying VAT twice or sitting on an enquiry letter.

This is the £1m+ operator's guide to marketplace VAT. If you need the full who's-who primer on the facilitator rules first, our marketplace facilitator VAT explainer covers the basics. This one is about what actually breaks in your books when the platform collects the tax.

Whose VAT Is It? The Four-Way Test

Under the rules HMRC has run since January 2021, an online marketplace is treated as the supplier, and collects the VAT, in a narrow set of situations. TikTok Shop ticks every box of HMRC's marketplace definition: it sets the terms, processes the payments, and runs the ordering and delivery. So the test applies to it in full.

Run your own sales through these four scenarios and you will know whose VAT each one is:

  • UK-established seller, stock in the UK, selling to UK consumers. That's you, at 20%, on your own VAT return. The marketplace may process the customer's VAT-inclusive payment, but it does not account for the VAT as deemed supplier. You do.
  • Overseas seller, stock already in the UK, sale to a UK consumer. The marketplace accounts for the VAT, whatever the value of the goods. The overseas seller makes a zero-rated deemed supply to the platform. If a VAT-registered business customer gives a valid UK VAT number, the seller accounts for the VAT under the normal domestic rules instead.
  • Goods outside the UK at the point of sale, sold to a consumer in Great Britain, in a qualifying non-excise consignment worth £135 or less. The marketplace charges and accounts for UK VAT at checkout. The £135 is the intrinsic value of the whole consignment, not each item.
  • UK VAT-registered business customer. Where the goods are outside the UK in a consignment worth £135 or less, the marketplace does not charge VAT and the customer accounts for it under reverse charge in Great Britain. Where the goods are already in the UK, the seller charges and accounts for the VAT under the normal rules.

That second and third scenario are why a customer can buy something on Amazon or TikTok and see "VAT collected by the seller" or VAT baked into a price charged by the platform. The goods are coming from a non-UK business, so the platform stands in for them. Those sales are not yours, even when they happen on your marketplace.

For a UK-established brand, the trap is the reverse. You assume the platform is handling VAT because it handles everything else. It is not. Amazon does not account for the VAT on your UK sales. TikTok does not either. They may process the customer's VAT-inclusive payment, but the output VAT is yours. You charge it, you account for it, you pay it to HMRC, and you file it under Making Tax Digital like every other registered business, unless HMRC has granted you an exemption.

When the Marketplace Is the Deemed Supplier

Now the accounting bit, because this is where the money goes missing.

Say a UK consumer buys standard-rated goods from a seller shipping from China, with a VAT-exclusive intrinsic value of £100. TikTok displays and charges a VAT-inclusive price of £120: £100 net plus £20 UK VAT, which TikTok accounts for as its own output tax under the low-value marketplace rules. If you are the underlying seller, that £20 is not your output VAT and you must not put it on your return.

The settlement shows the £120, minus the platform's fees, minus the "tax" line, and the bookkeeper books the net. Or worse, the gross with a VAT line that has never been near your VAT account. Either way, someone else's VAT is sitting in your numbers and your return no longer ties to your books.

The rule of thumb I give every client: if the marketplace is the deemed supplier and accounts for the VAT, it is a cash movement, not a tax line. It appears in your settlement as a deduction, it reconciles as a cash flow, and it never touches box 1 of your VAT return. The moment you book someone else's output tax as your own, you are either paying it twice or explaining a mismatch to HMRC.

And the matching error runs the other way too. UK-established sellers who think "the platform handles VAT" often never charge VAT on their own sales at all, because the marketplace does not add it for them. The price you set on TikTok Shop is the price that includes your VAT. If you price like a non-registered business and sell like a registered one, you are funding the 20% out of your own margin.

The £1m+ Trap: Booking the Net Settlement as Sales

Here is the pattern I see in almost every inherited file from a brand past £1m: the net payout is booked as revenue, and the VAT question quietly disappears.

Run the numbers on a TikTok Shop channel doing £1m of VAT-inclusive sales a year, all your own UK sales. The VAT inside those sales is £166,667. If your books record the payouts net of fees, and never reconstruct the gross, then your turnover is understated, your VAT return is built on whatever the settlement happened to show, and your profit margins are a guess.

It gets worse when you mix channels. I do not assume every Amazon account pays out fortnightly. The schedule depends on the account: Amazon's own UK pages currently give conflicting weekly and fortnightly descriptions. What I do assume is that the transfer nets everything down, with fee VAT, advertising, refunds, reserves and adjustments buried inside. TikTok's payouts land on their own schedule with their own deductions. A multi-channel brand reconciling each to the bank but never to the VAT rules ends up with books that balance and a return that is wrong. The two can coexist for years. HMRC's platform reporting data, which we will come back to, is what ends the party.

The fix is boring and it works: reconstruct gross sales per channel from the order reports, not the payouts. VAT-exclude your own UK sales, put the output tax on your return, and treat every platform deduction as what it is: an expense, a cash movement, or someone else's tax.

The Fees Are Where the VAT Reclaims Live

Here is the part founders actually like, because it is money coming back.

Amazon charges 20% VAT on most of its UK seller fees, including advertising. On £50,000 of VAT-inclusive fees a month, that is £8,333 of reclaimable input tax, if you book the fees gross and let the VAT hit your return. If the fee line goes into your accounts without the VAT split, the reclaim simply never happens.

TikTok's commission works the same way, just packaged differently. The headline rate is 9% including VAT, so the VAT inside it is one sixth of the fee. On a £100,000 sales base in a month, the commission is £9,000 and the VAT inside it is £1,500. There is also a £0.50 VAT-inclusive fee per delivered Shipped-by-Seller package, with its own small reclaim. And on eligible Electronics and Beauty and Personal Care orders, the effective rate drops to 5%, which changes the maths: the VAT inside 5% is £833 per £100,000 of base.

None of this is reclaimable if your fee lines are mapped to a no-VAT code. We regularly inherit TikTok files where commission is booked as a single non-VAT expense. On a £1m channel, that is roughly £15,000 of input VAT left on the table a year, and the same again on the Amazon side if the fee split is missing. The automation tools, A2X and Link My Books, pull the data, but they only reclaim what their tax code mappings allow. Someone still has to check the codes.

The full anatomy of TikTok's deductions is in our TikTok Shop fees guide, and the Amazon side in our Amazon FBA VAT guide. Both are worth reading before your next return.

Import VAT: The Flow That Touches You Anyway

Even if none of your sales trigger the marketplace collection rules, import VAT still finds you, because your stock crosses the border.

Bring goods into the UK and import VAT is charged at the border. If you are not using postponed VAT accounting, you pay it upfront and reclaim it later, which parks your cash with HMRC for weeks. With PVA you declare and recover the import VAT on the same return. For a fully taxable business on standard accounting, that is cash neutral. It is one of the few free lunches in VAT, and most scaling brands we take on are not using it properly.

Keep the evidence: the monthly postponed import VAT statement, or the C79 certificate if you pay at the border. Online statements move to the archive after six months, and the reclaim dies without the paperwork.

There is one more import flow specific to marketplaces. If an overseas seller holds stock in the UK and sells through Amazon or TikTok, their supply to the marketplace is zero-rated by design, so they can register and reclaim the import VAT they paid. If you buy from such sellers, none of that touches your return. If you are the overseas seller, the rules are different from the ones in this post, and you should get specific advice before you hold stock here.

The 2026 Shift: HMRC Wants the Marketplaces to Collect for UK Sellers Too

Now the bit that changes your next two years.

On 23 June 2026, HM Treasury and HMRC opened a consultation on extending online marketplace liability to UK businesses. The idea is that marketplaces would become responsible for accounting for VAT on the sales they facilitate for UK sellers, the same way they already do for overseas sellers. HMRC's own estimate is that tens of thousands of UK businesses trading through marketplaces are not meeting their VAT obligations, with losses running to hundreds of millions of pounds a year. The consultation closed on 18 August 2026, so the design phase is now underway.

Two options were on the table, and the choice matters for you. One is a minimum platform threshold: the marketplace only collects once a seller's per-platform sales pass a set value, which would pull most £1m+ brands straight into scope. The other is a VAT rate relief for businesses below the registration threshold, which protects the small sellers and leaves the big ones, meaning you, as the collection point. Private individuals selling second-hand goods are out of scope either way.

Read what that means if it lands: the platform remits your output VAT to HMRC on your behalf, your settlements change shape, and HMRC reconciles what the platform paid against what you filed. Your books need to be able to prove the same number from two directions, because the platform's records and yours will be sitting next to each other in a compliance check.

This is the direction of travel, not speculation. The 2021 reforms were aimed at overseas sellers. The 2026 consultation is aimed at domestic ones, and it follows the same logic: when the marketplace is the collection point, the VAT actually arrives. Our platform reporting guide explains the data side that makes this possible, and it is already live: marketplaces hand HMRC your identity, quarterly consideration after deductions, fees and taxes withheld, and transaction counts, every year by 31 January.

The Monthly Reconciliation: Four Lines That Catch Everything

You do not need a VAT department. You need four lines checked every month, and the discipline to run them.

  • Line one: your own output VAT. Gross UK sales per channel from order reports, VAT-excluded, on your return. If the settlement was the source, you are wrong and you do not know it yet.
  • Line two: marketplace-collected VAT. Traceable in the settlements as a deduction, excluded from your return, and reconciled as cash. If you cannot find where the platform's tax line went, that is the enquiry.
  • Line three: fee VAT reclaimed. Amazon's 20% on fees and advertising, the VAT inside TikTok's 9% and the £0.50 package fee, all booked to VAT-bearing codes. On a £1m+ channel this is five figures a year.
  • Line four: import VAT. Postponed accounting on the same return, statements and C79s filed where you can find them in six months' time.

Run those four lines and your VAT return stops being a leap of faith. Our free VAT registration checker tells you where you stand on registration, and the TikTok Shop VAT checklist walks the TikTok side line by line. The same discipline across all your channels is in our multi-marketplace finance stack guide, and the Amazon reconciliation mechanics in yesterday's deep dive.

Frequently Asked Questions

Does Amazon or TikTok Shop collect VAT on my UK sales?

Not as deemed supplier, if you are a UK-established business selling UK stock to UK consumers. They may process the customer's VAT-inclusive payment, but you account for the VAT at the rate that applies to your goods. The marketplace only accounts for it in the deemed-supplier situations: qualifying low-value imports of £135 or less, and qualifying B2C sales of UK-located goods by overseas sellers.

The customer invoice says VAT was collected by the platform. Do I put that on my return?

No. If the marketplace is the deemed supplier and accounts for the VAT as its own output tax, booking it as yours means paying it twice or carrying a mismatch that an enquiry will find.

What is the £135 rule, exactly?

When qualifying non-excise goods are outside the UK at the point of sale, sold to a consumer in Great Britain, and the whole consignment is worth £135 or less, the marketplace charges UK VAT at checkout and accounts for it. The £135 applies to the consignment's intrinsic value, not each item, and goods above it follow normal import rules. Northern Ireland and excise goods follow different rules.

Can I reclaim the VAT on TikTok's and Amazon's fees?

Yes, if you book the fees gross with the right VAT codes. Amazon charges 20% VAT on most UK fees including advertising. TikTok's 9% commission includes VAT, so one sixth of it is reclaimable: £1,500 on every £100,000 of sales base. Wrong tax codes silently kill these reclaims.

Is HMRC going to make marketplaces collect VAT from UK sellers?

The consultation on exactly that closed on 18 August 2026. The proposal is for marketplaces to account for VAT on UK sellers' sales, with either a minimum platform threshold or a rate relief for small sellers. If it becomes law, your settlements change and your books need to prove your VAT from both directions.

Does platform reporting mean HMRC already knows my numbers?

It knows the marketplaces' numbers. They report your identity, quarterly consideration after deductions, fees and taxes withheld, and transaction counts, annually by 31 January. It is not item-level product data, but it is enough to compare against what you file, and the gap is what an enquiry looks like.

Summary: Know Which VAT Is Yours

Marketplace VAT is not complicated. It is a single question asked a thousand times: whose VAT is this one? Yours, the platform's, or the customer's under reverse charge. The brands that scale past £1m without the wheels coming off are the ones that can answer it for every line of the settlement.

The platform accounts for the VAT for overseas sellers and qualifying low-value imports. For your UK-stock sales, it accounts for nothing: it may process the payment, but the output VAT is yours. You charge, you reclaim, you file, and you keep the evidence. And the rules are moving towards the marketplaces collecting for UK sellers too, which means the reconciliation you build now is the one that keeps you clean when that lands.

Turnover is vanity, profit is sanity, cash is reality. And VAT is the one line where being sloppy costs you twice: once in the reclaim you never made, once in the enquiry you never saw coming.

If you're doing £1m to £20m across Amazon or TikTok Shop and you can't tell me whose VAT is in your books, that's exactly the conversation we should have. Book a call and we'll look at your real settlements, not a generic checklist. See how we help Amazon sellers and TikTok Shop sellers.