Chancellor John Healey is reportedly preparing to make online marketplaces including Amazon, eBay and Temu responsible for collecting VAT from business sellers.

The reported measure is expected to raise up to £1 billion for the Treasury ahead of his first Budget on 28 October.

The Times reported that the proposed changes would target overseas retailers avoiding VAT on sales to UK customers and help fund business rates cuts for high street shops. Under the reported plans, marketplaces would collect VAT at source from business sellers with annual turnover exceeding £90,000.

According to Reuters, Amazon has welcomed the proposal and estimated it could generate approximately £700 million for the Treasury. Amazon, eBay and Temu had not immediately responded to requests for comment on the reported plans.

The proposals come as traditional retailers press the government to address tax and customs arrangements they argue give overseas online sellers a competitive advantage. Retailers have called for action against low-value imports, particularly from international ecommerce platforms.

Healey announced in June that the government would scrap customs duty relief on low-value imports from October 2028. The change is intended to close a loophole benefiting online retailers such as China's Shein, although the reported VAT collection proposal would represent a separate measure.

The potential business rates cuts would address pressure on high street retailers facing higher operating costs. Before his election in Makerfield, Andy Burnham pledged to raise the business rates threshold so that 140,000 small high street retailers would no longer pay the tax.

The reported plans come as Healey faces competing demands over taxation and public spending in his first Budget. The Institute for Fiscal Studies warned this week that the government must address £35 billion in spending pressures, with higher inflation threatening existing spending plans.

The IFS said the chancellor would need either to provide additional funding or implement substantial real-terms spending cuts by the end of the decade. The warning highlights the challenge of financing tax reductions while maintaining public services and meeting fiscal commitments.

The International Monetary Fund upgraded its forecast for UK economic growth in 2026 to 1.3 per cent, an increase of 0.3 percentage points from its July projection. However, the IMF urged the government to maintain its efforts to repair the public finances.

A Treasury spokesperson declined to comment on the reported proposals, saying: “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.”

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