United Kingdom (Updated April 2024)

General Information

 

Tmain items of legislation specifically related to direct selling are:

• Consumer Contracts (Information, Cancellation and Additional Payments) Regulations 2013.
• Fair Trading Act 1973 sections 118-120 (apply to MLM operations).
• Trading Schemes Regulations 1997 (apply to MLM operations).
• Some parts of the Consumer Protection from Unfair Trading Regulations 2008.

 

Cooling-off Period

In the typical direct selling situation (a face-to-face sale away from retail premises), the consumer has the legal right to cancel the contract by giving the seller (usually by post or email, but it can be by any method including by telephone) a clear statement cancelling the contract. This can be done any time up to 14 days after delivery of the goods. If the contract is for services the deadline is 14 days after the making of the contract. There are limited exceptions, including in the case of personalised or made-to-measure goods. The exceptions do not apply unless the consumer is informed that there is no right to cancel. The same rules apply in the case of distance purchases (e.g. online orders) by consumers. The consumer must be given, at the time of the order being placed, a Notice of the Right to Cancel together with a model cancellation form which he may use to give notice of cancellation. The Notice of the Right to Cancel should be incorporated within the customer order form given to the consumer. The law is in most respects the same throughout the EU, as it derives from the EU Consumer Rights Directive. In the UK the law is stated in the Consumer Contracts (Information, Cancellation and Additional Payments) Regulations 2013. In the UK, there is an additional exception whereby there is no right of cancellation in the case of a face-to-face sale for an amount not exceeding £42.

 

The following are available to members of the DSA:

• The DSA Guidance Sheet on Customer Order forms, setting out how to achieve compliance.
• A DSA Specimen Returns Policy, which covers both the typical direct selling situation and distance sales (e.g. sales made via the company website).

 

Pyramid Schemes

The following is banned by item 14 in the first schedule to the Consumer Protection from Unfair Trading Regulations 2008 (implementing the European Directive on Unfair Commercial Practices):

“Establishing, operating or promoting a pyramid promotional scheme where a consumer gives consideration for an opportunity to receive compensation that is derived primarily from the introduction of other consumers into the scheme rather than from the sale or consumption of products.”

 

Section 120(3) of the Fair Trading Act 1973 makes it an offence to invite someone to join an MLM trading scheme (and to make a payment) by holding out to him the opportunity of receiving benefits from introducing others into the scheme.

MLM companies are advised not to offer recruitment fees (i.e. fees purely for recruiting others) but to make all benefits to participants depend upon sales/purchases of products.

 

Multi-Level Marketing

This is governed by the Trading Schemes Regulations 1997. These regulations apply within the UK and lay down rules relating to the contents and form of:

• Recruitment advertisements and recruitment materials (including on websites).
• Direct Seller Agreements.

 

Failure to comply with the law is a criminal offence. Signing up direct sellers online is probably legal but only if the requirements of the Trading Schemes Regulations 1997 are complied with.

The Trading Schemes Regulations also place a ban on a direct seller paying (or committing himself to pay) more than £200 during the first seven days. Thus a starter pack which a direct seller commits to buying when signing up cannot legally cost more than £200. It is the company which commits the criminal offence if in the agreement or in the following seven days it accepts from the direct seller any commitment to pay more than £200. Thus the company needs to ensure that its computer system is programmed to block acceptance (during the direct seller’s first seven days) of any order which would take the direct seller’s commitments over £200. If at the time of sign-up (or within the following seven days) the direct seller agrees to an autoship arrangement, that will infringe the ban – even if the monthly amount is, say, only £15 and even if the autoship arrangement is cancellable at any time.

The following are available to members of the DSA:

• • DSASummary Sheet of Legal Requirements for Recruitment Advertisements.
  • DSAChecklist for the contents of Direct Seller Agreements.
  • DSAmodel direct seller agreement.
  • DSAleaflet on Online Sign-up.

 

Prohibition on Products

Generally, there are no prohibitions on the sale of any consumer products by the direct selling industry. However, certain products and labelling of those products (e.g. nutritional products, foods, herbal remedies, cosmetics, electrical products) must be approved by UK / EU authorities for sale in the UK. Also certain regulated industries (e.g. drugs, alcohol, tobacco, medicines) have requirements or restrictions that apply generally and do not discriminate against direct selling.

 

Credit Restrictions 

The Consumer Credit Act 1974 and the regulations made under that Act impose extensive and detailed controls and requirements. Any company wishing to provide credit to its consumers (or to its direct sellers) should take professional legal advice.
Any direct selling company wishing to provide credit to its consumers (or direct sellers) must be authorised by the Financial Conduct Authority (the FCA). Also any direct selling company which introduces consumers (or direct sellers) to a third party source of credit (e.g. a bank or financial institution) must similarly be authorised (as a credit broker).

A consumer who enters a consumer credit agreement away from trade premises will normally have a right to cancel the agreement during a cooling off period of some days after he has made the credit agreement or received a copy of it.

 

Money Collections

Direct selling companies and direct salespeople are free to collect any payments or down payments at any time.

 

Licenses

For those who offer credit to their customers (or direct sellers) or who introduce them to a source of credit, see “credit” above.

No license is required in the UK to operate as a direct selling company or as a direct seller, except that under the Pedlars Act 1871 a certificate from the local police is required to operate in any given area as a pedlar (a seller of goods who carries his goods from house to house for immediate sale).

Status of Direct Sellers

The status of a direct seller depends on the contract terms under which he is engaged.
In the case of most UK DSA member companies, each direct seller is:

• Not an agent of the direct selling company;
• A principal (e.retailer) who buys products from the direct selling company and sells them to consumers;
• Not an employee but in business on his/her own account.

Usually a direct seller’s agreement has been carefully drawn so as to achieve these outcomes: see the DSA’s model direct seller agreement.
It follows from (i) and (ii) that when a consumer places an order with a direct seller, the consumer makes a contract with the direct seller (and not with the company).
It follows from (iii) that the direct seller is himself/herself responsible for informing the tax and national insurance authorities about his/her income.
If, on the other hand, the seller is an agent of the company, both the company and the agent will be subject to the Commercial Agents Regulations 1993, with the result that upon termination of the direct seller’s agreement, the direct seller may be entitled to compensation.

 

Earnings Claims

All earnings claims have to satisfy the Advertising Standards Authority’s requirement that any claim is honest, lawful, decent and true. Additional requirements are imposed on multi-level marketing schemes.

 

Taxes and VAT

Provided that the direct seller is not an employee, there is no requirement for the direct selling company to withhold any remuneration for tax or social security.

A direct seller who is not an employee is responsible for tax and social security (National Insurance) matters, including:

• Keeping accounts and records,
• Informing Her Majesty’s Revenue and Customs (HMRC) of his/her income,
• Making payments to HMRC.

 

A direct seller is not required to register for VAT unless his/her annual turnover exceeds a threshold (in 2024 £90,000).

A direct selling company will normally be able to negotiate with the relevant VAT office to pay VAT on the assumption that a negotiated percentage of sales are sales to end consumers at the full retail price and the remainder of the sales are at a lower price sold to direct sellers for self-consumption.

 

Available in the public area of the DSA website:

• Tax & Accounting advice for direct sellers.

 

Social Security

 

Direct sellers are self-employed therefore have to declare earnings to allow an assessment for Income Tax and National Insurance. 

 

Income Tax:

Earnings          Tax Payable

£0 -£12,750           0%      Personal Allowance

£12,571-£50,270      20%

£50,271-£125,140     40%

£125,141+            45%      No Personal Allowance allowed

 

National Insurance:

Earnings           NI Class          NI Payable

£0-£6725           Class 2           £3.45 p/w on a voluntary basis

£6726-£12,569      Class 2           £0 p/w 

£12,570-£50,269     Class 4           6% of profits between £12,570-£50,269

£50,270+           Class 4             6% of profits between £12,570-£50,269 and 2% of profits above this

 

All Direct Sellers must register with His Majesty’s Revenues and Customs. 

 

 

Others

DIRECT SELLERS – COOLING-OFF AND BUY BACK

For MLM operators, the direct seller has a legal right to cancel his direct selling agreement during the first 14 days and to return any goods and receive a complete refund of all payments made.
At any later time during the agreement, the direct seller has the right to terminate the contract by giving 14 days’ written notice. After termination, he has the legal right to require buy-back of unsold goods which the direct seller purchased up to 90 days before the contract was terminated. He is entitled to a full refund (less a handling charge of, usually, 10%).
The DSA Code of Business Conduct extends the buy-back rights to goods purchased up to one year before the contract was terminated but allows a 10% deduction for handling etc.
The buy-back rights must be included in the direct seller’s written contract: see the DSA’s model direct selling agreement.

PROTECTION OF PERSONAL DATA

The Data Protection Act 2018.  Data protection: The Data Protection Act – GOV.UK (www.gov.uk)
Important aspects are:

• You (the data controller) should have the consent of an individual (g.a direct seller) to hold or process his personal data. If you intend to transmit such data outside the European Economic Area, you should obtain specific consent for that (e.g. in your direct seller agreement).
• Individuals are entitled to obtain from you details of personal data you hold held on them – and to ask for it to be corrected.
• Businesses holding or processing personal data are under a duty to register with the Information Commissioner (subject to some exemptions).
• You should comply with the eight data protection principles:
  1. Personal data shall be processed fairly and lawfully and, in particular, shall not be processed or held unless, either the data subject has given his consent or it is necessary for one of a number of specified purposes: including,
     • For the performance of a contract to which the data subject is a party, (or for the taking of steps at the request of the data subject with a view to entering into a contract).
     • For compliance with any legal obligation to which the data controller is subject, other than an obligation imposed by contract.
     • In order to protect the vital interests of the data subject.

There are additional restrictions on the use of “sensitive” personal data.

• 2. Personal data shall be obtained only for one or more specified and lawful purposes, and shall not be further processed in any manner incompatible with that purpose or those purposes.
  3. Personal data shall be adequate, relevant and not excessive in relation to the purpose or purposes for which they are processed.
  4. Personal data shall be accurate and, where necessary, kept up to date.
  5. Personal data processed for any purpose or purposes shall not be kept for longer than is necessary for that purpose or those purposes.
  6. Personal data shall be processed in accordance with the rights of data subjects under this Act.
  7. Appropriate technical and organisational measures shall be taken against unauthorised or unlawful processing of personal data and against accidental loss or destruction of, or damage to, personal data.
• • Personal data shall not be transferred to a country or territory outside the European Economic Area unless that country or territory ensures an adequate level of protection for the rights and freedoms of data subjects in relation to the processing of personal data.

Further information can be obtained from the Information Commissioners’ Office: www.ico.gov.uk
The DSA Codes require direct sellers to be given written advice as to the safeguarding of the personal data which they have relating to their customers and downlines.

The following is available to members of the DSA:

• Specimen Guidance for Direct Sellers on Safeguarding of personal data of others (part of the annotations to the DSA Consumer Code)

Consumer Law

Consumer protection law in the UK has been affected by the UK’s withdrawal from the EU (Brexit) and divergence from EU legislation may follow in the coming years.

 

Consumer protection law is formed from many different legislative sources, with most deriving from EU regulations and directives. For example, two of the most significant pieces of UK consumer protection legislation, the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 and the Consumer Rights Act 2015, implement most of the provisions of the Consumer Rights Directive (2011/83/EU).

 

Effect of Brexit: 1 January 2021

 

Whilst EU based law remained largely in force and applicable during the transition period in 2020 (albeit with a different legal basis for such application), the transition period has now expired.

 

Two of the main changes for consumers are:

 

1. Online dispute resolution – the European Commission operates a dispute resolution platform known as the ODR platform to resolve disputes arising from cross-border B2C transactions with the help of an approved dispute resolution body. From 1 January 2021, UK consumers will no longer be able to submit a new complaint on the ODR platform and will also not be able to act on any ongoing cases in the platform, whether to send it to a dispute resolution body, contact a UK ODR advisor or receive an outcome. UK businesses will not be able to access the ODR dashboard.

 

2. Co-operation between national enforcement authorities – the Consumer Protection Cooperation Regulation (2017/2394) has been revoked. The Regulation sought to facilitate cooperation between EU enforcement authorities in relation to consumer protection and enable the European Commission to co-ordinate common actions between national enforcement authorities.