It’s undeniable that e-commerce has transformed business and retail. From a consumer’s perspective, our relationship with retail has totally changed, with almost any product available to us at the click of the button. For many businesses, the ability to break away from traditional retail, overcome geographical constraints and reach a wider audience – all for lower costs – has been revolutionary. As a result of the pandemic, e-commerce accounted for over 36% of the total retail market in the U.K. in 2020 and sales reached £356.4 billion in 2019. With e-commerce projected to continue growing, it’s clearly an exciting space to do business in.
Just as with starting any business, there are certain legal requirements and obligations that come with starting an e-commerce business in the U.K. However, the U.K. is a complicated legal space comprising three jurisdictions: England and Wales, Scotland, and Northern Ireland. This article will be focussing on the legal procedures involved in setting up an e-commerce business in England and Wales.
We will walk you through the key legal requirements that you will encounter when starting your e-commerce business by examining the key statutory instruments. You will find out why all e-commerce stores list certain information on their websites and what kinds of legal duties you have to your online customers, all with simple explanations of the legal basis underlying these requirements.
Legal requirements for starting an e-commerce business in England and Wales
The English law pertaining to the regulation of online business is contained within a range of different statutory instruments. Some of these laws apply to all types of business whilst others are specific to online trading.
If you want to find out more about the general legal requirements for starting a business in the U.K., read our last guide.
Generally speaking, even if your business operates online, if it has a U.K. establishment you will have to register and account for U.K. VAT on any U.K. sales if your turnover is over the current threshold of £85,000. You will also have to incorporate your business and create a vehicle through which your business can operate.
You can learn about the different types of business structure in the U.K. using our blog article.
This article walks you through the major legal requirements associated with general e-commerce, but you should check if any additional legislation applies to your specific kind of business. If you want legal assistance in doing so, get in touch to speak with one of our expert business lawyers.
E-commerce website legal requirements: you must include certain information on your website
As set out in the Electronic Commerce (EC Directive) Regulations 2002 and the Companies Act 2006, businesses must (at a minimum) include the following information on their website:
1. Name
2. Address
3. E-mail address
4. Company registration number (or equivalent means of identification).
5. Limited company registration and VAT number (if applicable)
6. Clear pricing with guidance about whether it includes VAT and delivery costs
7. The name of any trade bodies or professional associations you are part of
8. Language options for conclusion of contract
9.Terms and conditions that customers can save and reproduce easily
10. It is also good practice to include certain disclaimers on your website to protect your business from liability arising from the accuracy of the information on your website
In addition, as per the Limited Liability Partnership and Business (Names and Trading Disclosures) Regulations 2015, you are also required to display the name your business is registered under, where in the U.K. you are registered and your registered business number.
Specific contract clauses and cancellation rights
The Consumer Contracts (Information, Cancellation, and Additional Charges) Regulations 2013 imposes responsibilities on e-commerce website operators and gives consumers cancellation rights. To ensure that your consumer contracts are fair and law-abiding, you must give your customers certain information including the main characteristics of the products, total costs, specific payment and delivery arrangements.
In addition, you must respect and honour the consumer’s right to cancel any online contract within 14 days. Note, as well, that if you intend to place extra charges on the consumer, you will need to obtain their explicit consent.
Fully inform your customers before they place an order
In addition to clear pricing and delivery terms, you must provide your customers with accurate product or services descriptions (with as much information as possible) and inform them fully about how they can enforce their cancellation rights and when these rights end. It’s good practice to include a standard cancellation form.
In addition, you should clearly stipulate minimum length of contract and, where relevant, any conditions associated with ending rolling contracts or indefinite contracts.
A further requirement is that your website design or copy must clearly lead your customer through the ordering process. You must make it clear to your customer that they have to pay before you will accept any order. This can manifest as simply as buttons that say ‘Go to Checkout” and “Pay Now’.
Your website should also make it simple for customers to take steps to correct any mistakes in their order.
Deliver your contract on time after an order is placed
When you start trading and you are making sales, you will need to ensure that you send customers a copy of the contract between you. This can be on paper, email or another format but it must arrive no later than the delivery date.
Unless you’ve explicitly agreed otherwise, you are legally required to deliver your goods or services within 30 days of the order being properly accepted and payment taken..
Note: these regulations don’t apply to goods worth less than £42, financial services, or food and drink that are supplied on a regular basis.
Be aware of implied terms in your consumer contracts
E-commerce businesses also come under the Consumer Rights Act 2015 (“CRA”), which means that any contracts between you and a consumer will have key terms implied into them. Examples of these implied terms include the fact that your product or service must match the description, must be reasonably fit for service/purpose, and of satisfactory quality. For the supply of services, it must be carried out with reasonable care and skill and completed within a reasonable time frame unless agreed otherwise.
The CRA also protects the consumer from unfair contract terms and creates remedies in case of breach of contract.
GDPR, Data and Marketing Responsibilities
The UK GDPR and Data Protection Act 2018 exists to protect personal consumer data and how it’s used. It refers specifically to how personal data is stored, transferred, and processed. The way it applies to e-commerce businesses is that is governs how you are allowed to collect and use your customers’ data, how long you can store it, as well as the quality of the data.
You are responsible for using your customers’ data fairly, lawfully and transparently, and only for the purposes that you specify. You are also responsible for how any of your suppliers use customers’ data, if they have it. There is additional legal protection for more sensitive data including a person’s race, ethnic background, political opinions and more. So, if your business handles a lot of consumer data by nature, be sure to fully inform yourself about your responsibilities under the Data Protection Act 2018 and the GDPR.
Card Payments through your website
PCI DSS (Payment Card Industry Data Security Standard) is not actually part of English law. While there is no legal obligation to comply with the PCI DSS, if you fail to follow its provisions, your business could face a fine.
The PCI DSS is a global standard that aims to ensure that card transactions are secure. Its provisions apply to any U.K. organisation that processes or transmits cardholder data. There are 12 requirements under the PCI DSS that relate to processing and storing cardholder data including the responsibility to:
1. Use a firewall to protect data
2. Not use vendor– supplied defaults passwords
3. Take measures to protect and secure stored data, including regular testing of your security infrastructure
4. Encrypt the transmission of data and sensitive information.
5.Use anti-virus software
You can find the full list of requirements here.
Frequently asked questions
1. Do you have to register an e-commerce business in the UK?
Yes, you need to register with HMRC regardless of the business structure you choose. If you opt for a Limited Company or Limited Liability Partnership, you will also need to register with Companies House.
2. How to set up an e-commerce business?
As we’ve seen, setting up an e-commerce business involves an understanding of the legal requirements for starting an e-commerce store in the UK. To give a brief overview of the process, you will need to:
- Establish a vehicle for your business to operate through (ie. choose a business structure)
- If you choose a limited company or limited liability partnership (LLP), you must register with Companies’ If you choose to be a sole trader or partnership, you do not have to.
- Whether you are incorporating as a limited company, or a limited liability partnership or as a Sole Trader, you will need to register with HMRC
- Establish an online trading presence and buy a domain name
- Ensure your website is compliant by listing all the necessary information
3. Which e-commerce is best in U.K?
The most successful e-commerce business in the U.K. currently is amazon.co.uk, closely followed by tesco.com.
4. How many eCommerce companies are there in the U.K.?
In 2021, Osome found that e-commerce accounted for one quarter of all retail sales in the UK.
5. How much is eCommerce worth in the UK?
According to the Office of National Statistic in 2019, the e-commerce sector’s revenue amounted to £693 million.
Conclusion
As with any type of business, nothing is ever completely straightforward. When it comes to e-commerce, even if it’s online, there are still a number of bureaucratic processes to go through and legal hoops to jump through. Having a good awareness of the legal requirements for starting an e-commerce business in the UK is a good place to start. However, if you are looking for more in-depth legal guidance, it would be advisable to instruct a lawyer to help you get things off the ground.
Get in touch with us to find out how our expert lawyers can help your e-commerce business for a fair and transparent price.