The government launched a wave of VAT consultations as part of its Tax Update 2026 and heavily featured VAT. Three in particular stand out for the breadth of businesses they could affect:
- A plan to make Direct Debit the required way to pay VAT
- Changes to how UK based suppliers using online marketplaces (OMPs) account for VAT
- A proposed new VAT relief for social housing land
None of these are settled policy yet. They are proposals out for consultation, which means the door is still open for businesses to have their say before the rules are finalised. All three close in August 2026, so there is a limited window to respond.
This matters because VAT touches almost every transaction a business makes, so even proposals that sound technical can have real, practical consequences. Below we’ve summarised each consultation, who it’s likely to affect and why it might be worth taking the time to respond.
Consultation A: Closes 16th August 2026
Paying VAT by Direct Debit as a mandatory requirement
At the moment, unless a direct debit instruction is already in place, paying the quarterly VAT liability is a manual job. Someone has to remember the deadline, log in, and make sure that the right amount goes to the right place using the correct reference. Miss a step and you can end up with a late payment, a penalty, or an unwanted phone call from HMRC. The government is consulting on making Direct Debit the required way to pay VAT (and PAYE). The aim is to make payments more automatic and reliable, reducing the number of businesses that miss deadlines simple because of an admin slip. It’s worth thinking about now if your business currently pays manually, pays from an account that isn’t always topped up in time, or has cashflow patterns that do not sit neatly with a fixed monthly Direct Debit.
Consultation B: Closes 18th August 2026
Bringing UK based businesses into the VAT net when selling goods on OMPs
After identifying some persistent VAT non-compliance from both domestic and overseas businesses, HMRC estimate that there are tens of thousands of businesses trading through OMPs based in the UK that are not fulfilling their VAT obligations. In order to combat this, the government is consulting on the proposal to make OMPs liable for accounting for VAT on more of the goods sold by UK businesses to consumers on their platforms. To minimise the impacts of the policy on businesses not required to register for VAT, the government is consulting two options: the first is OMPs liable only where per platform sales by UK businesses are above a specified value (referred to as a Minimum Platform Threshold) or making a VAT rate relief available to UK businesses below the VAT registration threshold.
Consultation C: Closes 18th August 2026
A simpler way to sell land for social housing
Building social housing often comes with an unhelpful VAT headache. Under the current rules, land can usually only be sold VAT free once construction has reached a certain stage, often described as the “golden brick” point. Before that, the sale can either be exempt from VAT or taxed at the full 20% rate, which creates extra cost and complexity for everyone involved. The government is now asking whether a new zero-rate VAT should apply much earlier where bare land is sold directly to a registered provider of social housing. The idea is to remove a barrier that’s been slowing down the delivery of new social housing, by making it easier and cheaper for housing associations to buy land before building work has even started. This one is particularly relevant to property developers, housing associations and registered housing providers along with the surveyors and finance teams who support these kinds of deals. If you are involved anywhere in that chain, this could change how land transactions are structured in the future.
None of these changes are decided yet and that’s exactly why it’s worth a read. Consultations are the point at which businesses can shape the detail of a policy before it’s agreed upon. If any of these proposals are likely to affect how your business operates, from marketplace sales to land transactions and your cashflow to pay your VAT bill, take time to respond before the window closes in August 2026.
If you’re unsure about whether these proposed policies apply to you or you’d like to talk through what a response might look like, please get in touch with Jessica Mason, our Head of VAT, who would be happy to help. You can reach her on [email protected].
