Hi, A Non-Established UK seller is already 18 months late for VAT registration as it just recently came to know that he is Non-established for tax purposes. It is storing products in UK and selling at online marketplace. Assuming the seller is having only B2C or B2B Non-VAT Registered Customer sales, since these sales will be zero-rated Deemed supply between Seller and Online Marketplace, so it means Output VAT will be 0. Assuming Seller has reclaimable Input VAT GBP 0 as well. Now online marketplace will take all unpaid VAT from seller since beginning, in this scenario, since the late VAT registration penalty is % of DUE VAT (Output VAT less Input VAT), the % will be 15% (more than 18 months late). But how HMRC will calculate the penalty amount since Due VAT is 0. Thanks https://www.gov.uk/guidance/late-registration-penalty-for-vat-notice-70041 The penalty is worked out as a percentage of the VAT due (output tax less input tax), from the date when you should have registered to the date when we either received your notification, or became fully aware that you were required to be registered. The rate of penalty depends on how late you were in registering: If you registered not more than 9 months late = Then the penalty rate will be 5% If you registered more than 9 months but not more than 18 months late = Then the penalty rate will be 10% If you registered more than 18 months late = Then the penalty rate will be 15% There is a minimum penalty of £50.