As the transition period for Brexit officially ended in January 2021, many e-commerce businesses may find it more difficult to attract European clients because it is now more expensive for EU customers to buy goods from the United Kingdom (UK) due to the value-added tax (VAT) levied on goods and services. The EU also has food import restrictions for non-EU member countries, and this may affect e-commerce businesses in the food and drinks industry in the UK. Despite these setbacks, e-commerce sales have been on the rise in UK, especially during the pandemic period where more and more consumers are shifting towards online shopping for safety reasons. If you are seeking to open an online platform to sell goods and services, it is important that you take note of the various regulations that will apply to your online business.
- Tax law
Goods imported into the UK are subjected to UK VAT of 0%, 5% or 20% depending on the type of good sold. Most goods will be taxed at the standard rate of 20%. Generally, transactions that do not exceed £135 in value will be taxed at the time when the transaction takes place. If the value of the transaction exceeds £135, then the VAT will be paid at the point of importation, together with the import duty. E-commerce businesses, regardless of the country in which they are incorporated, will be liable for UK VAT as long they import goods into the UK for their UK clients. If a business meets the turnover threshold for VAT in the UK, it will be required to register for a UK VAT number and remit the tax revenue to the Her Majesty’s Revenue and Customs (HMRC).
- Data protection
The Data Protection Act was implemented in UK in 2018 to ensure that people know what their data is being used for when they provide them to a business. Under the Data Protection Act, businesses must inform consumers how their data is being used and what it is used for. Consumers also have the rights to access and delete their data, as well as restrict the use of their data by businesses. In general, e-commerce businesses must ensure that they use clients’ data fairly and transparently and only when it is necessary. Clients’ data should not be kept longer than is necessary.
- Payment card security
E-commerce businesses in UK are required to comply with the Payment Card Industry Data Security Standard (PCI DSS) as long as they handle payment card data. The PCI DSS protects consumer data by ensuring that businesses implement stricter control and protection measures when processing and storing clients’ card information. This is accomplished by mandating that such businesses build and maintain a secure network, implement measures to protect cardholder data, execute a vulnerability management program and adhere to other information security standards listed by the law. All retailers that accept debit or credit card payment for goods and services will be required to adhere to the PCI DSS. Since most e-commerce businesses accept such payment methods, they will be required to comply with the standards listed in the PCI DSS.
- Consumer rights
Under the Consumer Rights Act (CRA) enacted in 2015, business owners must ensure that their goods are of a satisfactory quality and are able to perform the function they are supposed to. If the product provided by the business is found to be defective, consumers will have the right to reject the product and ask for a full refund within 30 days. All e-commerce businesses that provide goods and services in the UK must adhere to the CRA 2015 to ensure that the goods, services or digital content they provide meet the required standards. Businesses are also not allowed to engage in anti-competitive practices.
- E-commerce regulations
The E-Commerce Regulations 2002 implemented in the UK incorporates elements from the European Union (EU) E-Commerce Directive. The regulation ensures that sellers in an e-commerce platform are transparent about prices of its goods and services and the steps required to place and amend an order. Consumers must also be provided with information about the transaction such as the name and address of the service provider, the service provider’s registration number and place of registration if it is a company and an acknowledgement of the transaction by electronic means.
- Details of goods sold
Under the Consumer Contracts Regulations 2013, UK businesses are required to provide the following information when entering a sales contract with their clients. Information required include a description of the good or service sold, the price of each good and service, the method of payment and collection, the presence and amount of delivery charges or other costs, as well as the details of payment of delivery charges in the case of refund. In the case that delivery charges cannot be calculated, the fact that there will be delivery charges must be made known to consumers. E-commerce businesses must also ensure that information about the seller such as its address and contact details are made known to the consumer. Generally, consumers have the rights to cancel purchases without a reason within 14 days. However, they may be required to pay for delivery charges if this requirement is made known to them before the purchase of the good.
- Information about company
E-commerce companies that incorporate in the UK will be required to display key information about their business on the company website in a conspicuous manner under the Companies Act 2006. Information displayed will include the company name, specific location of incorporation, company office address, company email address and its VAT number.
Conclusion
Generally, all e-commerce businesses that are incorporated in the UK or have UK clients will be required to follow the regulations on commercial activities in the UK. Before you set up your e-commerce business in the UK, it is important to familiarise yourself with the new regulations and laws for e-commerce business activities in the UK. Although Brexit has led to higher costs for some e-commerce businesses, the e-commerce market in the UK is still the largest in Europe in terms of total revenue generated. Hence, it is still very attractive to set up an e-commerce business in the UK as it has the potential to cater to a larger consumer base.
