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Laws On Reselling Products UK

laws on reselling products UK

There is some confusion surrounding the term “reselling”. Whereas many would simply describe it as buying and selling items, it’s more specific than that. It’s buying items for a set price, and then selling them for a higher price.

Resale or reselling has become a business for many, who have developed an understanding of the art, knowing what items to target and where, and have found great success. But what are the laws they’ve had to navigate surrounding reselling? Read on to find out more.

Is reselling illegal?

No, reselling is not illegal. It’s considered a legitimate business practice in the UK, so you are free to resale all you like – however, some laws come alongside reselling that you must respect.

The following are rules you’ll have to abide by if you want to resell items:

  • The goods that you resale must not be restricted goods, nor must they be counterfeit.
  • You are legally obliged to ensure the products given are as described.
  • You must abide by all regulations.

As you can see from above, understanding your position as a reseller is not black and white.

Legal Considerations for Sole Trader Reselling Business

A sole trader describes a person operating as an individual, without a company at your back. Note that even a business owner or a business person/employee in a registered business is still considered a sole trader.

This is an important distinction, as operating as a sole trader means you have full and unlimited liability. Your business and personal finances are inseparable, and if you encounter legal issues or debt, it is you, not a company, who will have to face the music.

The following will apply:

  • Income Taxes – All profit generated from your reselling business is liable for income taxes. They will be calculated through the annual HMRC self-assessment process, requiring you to track business income, allowable expenses, and relevant tax breaks.
  • VAT – If your reselling business has a turnover that exceeds the VAT threshold, then you’re required to register to pay VAT.
  • National Insurance – Sole traders are liable for national insurance contributions based on business profits.

 

Taxation Considerations

 

Consumer Protection Legislation

The following legislation applies – you are obligated to ensure the consumer’s rights are protected.

  • Consumer Rights Act 2015 – When reselling items, you are obligated to ensure that the resold products meet basic standards. These basic standards are:
    • Being of satisfactory quality
    • Being as described
    • Fit for purpose
  • Consumer Contracts Regulation – For online sales, you are obliged to provide clear information regarding the product. This includes all costs involved, such as the price, shipping costs, and cancellation fees if applicable.
  • Distance Selling Regulations – These regulations are numerous and exist to protect buyers using an online store.
  • Data Protection Act – The Data Protection Act ensures that when personal information is collected by organisations, they become responsible for protecting that information from unauthorised users.

As you can see, reselling businesses are expected to ensure that all items sold are as described, mandating that a paper trail and proper communication are cemented.

Legal Considerations for a Limited Company Resale Business

A limited company is useful for business models that foresee long-term business activity and want to take advantage of the distinct legal and tax implications. This gives structure and potential benefits.

To become a company, a sole trader has to:

Register – Companies House in the UK is the official portal for those wanting to transform their business into a company. You will need to submit specific documents, appoint a company director, and pay fees.

A company seeking to sell online can enjoy limited liability, perhaps the biggest advantage a company has over a simple business. The personal assets of the business owner are shielded from all business debts.

The following are what you can expect to change between legal considerations you should make as a company versus a sole trader:

  • Corporation tax – A company is subject to corporation tax, which can be lower than income tax when you earn a certain amount.
  • Dividend Tax – The company director has heightened flexibility when it comes to paying salaries versus dividends.
  • Annual Accounts – Financial accounts and company updates must be submitted yearly to maintain legal company status.
  • Records – You are expected to keep meticulous records of income, expenses, assets etc.

Company Oversight

Companies are overseen by shareholders and directors. As a result, it’s important to note that all legislation previously talked about in the sole trader section also counts here, but with full compliance. This usually means that checks will be made internally to ensure compliance.

Sales Tax (VAT)

VAT is a consumption tax applied to all goods being sold, whether in a physical or online store. It’s crucial to understand if you plan to sell goods yourself.

When you resell goods, you must ensure that you are below your VAT threshold, otherwise, you must register. The threshold can change, so it’s best to search for the current figure at https://www.gov.uk/register-for-vat.

If the total value of your annual sales exceeds the threshold, then register immediately. Failure doesn’t necessarily mean an automatic trip to your local police station, but HMRC takes VAT compliance seriously. It could result in heavy penalties, including up to the entire unpaid VAT sum. Furthermore, investigations into your practice could be opened up to look for further failures to comply, which could damage your business’ reputation even if you are otherwise innocent.

Laws and Regulations on using an Online Store

Reselling items over an online store is one of the most common ways that reselling businesses make their money.

One of the most popular sites in the world for reselling is eBay. When using an online store of this calibre to resell items, it’s important to understand that the store itself is protecting both buyers and sellers.

An online store will mandate the following is complied with:

  • Consumer Contracts Regulations – A core set of rights is imposed on online stores to ensure that clear product descriptions, alongside all necessary information (costs, contact details of seller, cancellation policies) are present for each purchase. Furthermore, all buyers are entitled to 14 days of “cooling off”. This means they have the right to change their minds within 14 days for a full refund, with there sometimes being exceptions for perishable goods.
  • Distance Selling Regulations – For products bought at a distance, without the opportunity to see the product beforehand, a list of details is required via legislation, such as the item, its cost, and the contact information of the sellers.
  • E-commerce Regulations – The geographic address of your business must be provided on the online store should you sign up with one, alongside a working email address that a customer can reliably reach people on for support.
  • Data Protection Act – The online store is considered liable for any leaking of private information given by customers.

Should I create my online store?

If you want to create your online store to sell online, understand that you will be expected to comply with the above as well. Modern web development provides many features to help follow legislation compliance.

To resell products

What you cannot do as a reselling business

There are some things in the UK that you cannot do as a resale business owner.

  • Selling Restricted Goods – The sale of restricted goods in the UK is a no-go and can come with serious charges, depending on the goods involved.
    • Counterfeit Goods – Counterfeit goods can be things such as fake items, such as fake Gucci bags, or video games that have been pirated onto disks. To resell counterfeit items can come with serious fines, especially when it affects the bottom line of powerful companies.
    • Age Restricted Items – Items such as cigarettes and alcohol can only be sold to adults. You can potentially lose licenses by putting young people in danger by exposing them to such items.
    • Dangerous Goods – Goods such as chemicals or even something as benign as batteries can come with serious penalties, but only when you sell products without properly securing or making checks on them.
  • Misrepresenting Products – The misrepresentation of products can cause massive damage to your business. Misrepresentation typically only applies when a trader hides major flaws with a product that shouldn’t otherwise be there, such as saying a phone is of good quality when the screen is scratched. Ensure that the description is accurate and is bagged up by photographs of the items.
  • Violating Intellectual Property – Unless you are explicitly permitted by the brand, using trademarks or violating copyright law can lead to severe fines and interruptions in business.
  • Unethical Practices – Not all unethical practices are typically illegal. For example, price gouging during shortages, or making fraudulent bids to artificially raise prices.

Conclusion

Overall, a reselling business is a crafty and fairly modern way of being an online merchant. It can serve as a small business that acts as a side gig to a larger job or can be invested in enough to become something much larger. Overall, most laws surrounding reselling exist to protect the buyer. So long as you keep their interests in mind and ensure clear communication, we can’t imagine many having issues with a resale business.

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