VAT on e-commerce sales in the UK: delivery charges, market places and who actually owes the VAT
You sell the same product two ways. On your own website you charge the VAT, file the return and pay it over. On a marketplace, the platform may account for it instead, and you may never touch it. Meanwhile the postage line on your invoice is quietly costing you money you did not budget for. So who actually owes the VAT on your online sales, and why does the delivery charge catch so many sellers out?
Does delivery follow the goods, or is it a separate supply?
This is the question that decides whether your postage line carries VAT, and the answer is contractual rather than commercial.
If, under the contract, you must deliver the goods to a place the customer specifies, you are making a single supply of delivered goods. The VAT liability of the delivery follows the liability of the goods.
HMRC is explicit that itemising delivery separately on the invoice makes no difference. Splitting it out does not create a second supply.
That cuts both ways:
- Selling zero rated goods, such as children’s clothing or most food? The delivery is zero rated too.
- Selling standard rated goods? The delivery is standard rated, whatever you call it.
Delivery is only a separate standard rated supply in narrow situations: where the contract does not require you to deliver at all but you agree to and charge separately, where you deliver someone else’s goods, where you make a separate packing charge, or where goods go out on approval.
Note. On a normal checkout the customer enters a delivery address and you are contractually bound to deliver there. That is a single supply of delivered goods, even where the shopper chooses between standard and express at different prices.
Can I recharge Royal Mail postage “at cost” with no VAT?
Almost certainly not, and this is the most expensive small mistake in online retail.
The reasoning runs in three steps.
Royal Mail’s universal postal services are exempt, but that exemption belongs to Royal Mail and only where the services are subject to price and regulatory control. HMRC states it does not extend to similar services from other suppliers.
The exemption does not travel with the stamp. HMRC says directly that if a delivery charge you make to your own customers includes the cost of stamps bought from the Post Office, you may have to charge VAT on the whole amount including those stamps.
And it is not a disbursement. HMRC lists postage you incur sending things to customers as a normal business cost you must add VAT to if you recharge it. A disbursement requires your customer to have been responsible for paying the third party, with you acting as their agent. When you post your own goods you contract with Royal Mail in your own name, for your own supply.
Example. An online retailer ships 40,000 orders a year, recharging postage at an average of £3.20 with no VAT on the basis that it is “at cost”. The goods are standard rated, so the postage should have followed them. That is £128,000 of charges carrying £21,333 of VAT that was never accounted for. Across a four year assessment window, with interest and penalties, the exposure comfortably exceeds £80,000. Nothing about the business was dishonest. The invoice template was simply wrong.
Warning! There is a narrow disbursement route in HMRC’s guidance, but it is for mailing houses and direct marketing suppliers, and it carries conditions about when responsibility for the mail passes and about passing on rebates in full. It is not a route for a retailer posting its own products.
Who accounts for the VAT, you or the marketplace?
Since 1 January 2021, an online marketplace is treated as the supplier, and accounts for the VAT itself, in two situations:
Goods outside the UK at the point of sale, in a consignment worth £135 or less. You are treated as making a zero rated supply to the marketplace, and it charges the VAT to the customer.
Goods already in the UK at the point of sale, any value at all, where the seller is not established in the UK. There is no £135 test here. Value is irrelevant.
Above £135 on goods coming from outside the UK, the deemed supply does not apply and normal import VAT and customs rules take over.
Note. The £135 figure is the intrinsic value of the whole consignment, not per item, and it excludes transport, insurance and other identifiable taxes where those are shown separately. Several items shipped together are added up.
There is a business to business carve out. If your customer gives the marketplace a valid VAT registration number, the marketplace does not charge the VAT and the customer accounts for it instead.
Does this apply to my Shopify store?
Generally no, and sellers routinely assume the two are the same.
The deemed supplier rules apply to an online marketplace that facilitates the sale between you and the customer. A hosted storefront on your own domain is not facilitating someone else’s sale, it is your shop. There, you are the supplier, you charge the VAT and you account for it.
So the same seller can have Amazon or eBay accounting for the VAT on some sales while accounting for it personally on identical products sold through its own website. Both are correct, and the bookkeeping has to reflect it.
Tip. Reconcile marketplace settlement reports separately from your own site’s sales. Treating them as one revenue stream is how sellers end up either paying VAT twice or not at all.
What is changing?
On 23 June 2026 HMRC opened a consultation proposing to extend marketplace liability so that platforms would account for VAT on sales they facilitate for UK businesses, not just overseas ones. Mitigations under discussion include a minimum platform threshold at £90,000 or lower. This is a consultation, not law, and no implementation date has been announced. It closes on 18 August 2026. If a meaningful share of your turnover goes through marketplaces, it is worth responding while the window is open.
Separately, the government confirmed in July 2026 that it will remove the £135 low value import relief for customs duty, by October 2028 at the latest. The £135 VAT deemed supplier rule is unaffected and remains in place for 2026/27.
What should you do next?
Look at your invoice template first. If postage sits on a separate line with no VAT while the goods are standard rated, you have an exposure running back four years, and it grows every month you leave it.
Then confirm in writing who accounts for VAT on each sales channel, and make sure your bookkeeping treats marketplace and direct sales differently.
We look at e-commerce businesses as tax advisers rather than bookkeepers, and our team includes a Chartered Tax Adviser who has worked inside HMRC, so we know how these reconciliations get tested. Correcting an invoice template costs nothing today and a great deal in four years’ time.
If you sell online, speak to a Chartered Tax Adviser. There is more on our E-Commerce and Online Retail page, and a real postage case in our tax saving case studies.