Starting and running an online business in the UK requires compliance with a variety of legal standards. These ensure that both the business and consumer rights are protected in the digital marketplace.
Below, you’ll find a simplified guide to the most important legal requirements for online businesses.
- Register your business and domain name
First things first, you need to decide on the structure of your business. Most online businesses operate sole traders or limited companies. As a sole trader, registration is straightforward; you simply register for self-assessment tax returns with HMRC. If you choose to set up a limited company, as the legal vehicle for your business, you’ll need to incorporate a limited company with Companies House, which includes a bit more paperwork, like choosing a company name and address.
Additionally, acquiring a domain name that doesn’t infringe any existing trade marks is crucial. Before finalising your domain name, conduct a comprehensive trademark search using tools like the register of trade marks maintained by the UK Intellectual Property Office (IPO). This is a comprehensive database that includes most (not all) trade marks registered in the UK. It does not include non-registered marks that might be protected by other laws, such as the tort of passing off.
Other tools such as that provided by Wix can be useful to check availability on major domain registrars. Always consult a legal expert to navigate potential trade mark issues effectively to safeguard your brand.
TIP: Use the Companies House website to check if your business name is unique and to complete your registration. Keeping track of deadlines for tax and company returns on your calendar can save you from missing important dates.
- Data protection
If your business collects, uses, or stores personal information, you must comply with the UK’s Data Protection Act 2018 and the GDPR (General Data Protection Regulation). This means ensuring that personal data is gathered legally in accordance with strict conditions, so that those who collect and manage it do so in line with current best practice so help prevent misuse and exploitation.
TIP: To comply, make sure your website has a clear privacy policy that explains how you handle personal data. Use straightforward language to explain consent and include opt-in forms where users actively choose to share their data. Speak to us if you need advice.
- Consumer rights
Businesses must adhere to the Consumer Rights Act 2015 (CRA), which covers statutory consumer rights and remedies for goods and services purchased online. This includes ensuring products are as described, fit for purpose, and of satisfactory quality. You (as a trader) can not exclude your liability arising under the CRA and any attempt to do so is not binding on any consumer.
Online businesses must also respect the cancellation rights provided under the Consumer Contracts (information, cancellation, and additional charges) Regulations 2013, allowing consumers a cooling-off period. Your customers have a right to return products if they’re not as described, faulty, or if they change their mind within a specified timeframe (usually 14 days for online purchases).
TIP: Clearly display your returns and refund policy on your website. Consider using FAQs or a chatbot to explain consumer rights related to your products or services to help build customer trust and satisfaction.
- Website compliance
Your website must comply with several legal requirements:
Terms and conditions: These are necessary for protecting your rights, limiting liability, and defining the terms on which you sell goods or services.
Accessibility: Under the Equality Act 2010, your website should be accessible to all users, including those with disabilities.
Cookies and tracking: If your site uses cookies, you must inform users of this and gain their consent to do so.
TIP: Have a clear link to your terms and conditions at the footer of your website. For cookies, use a pop-up that appears when a user first visits your site, explaining what cookies are used, how this is done, and allowing users to accept or decline.
- Intellectual property
Protecting your brand and products is crucial. Intellectual property (IP) law can protect against theft or misuse of your business name, logo, content, products, and services. Ensure you have the rights to any website content, images, or logos you use.
TIP: Consider registering trademarks for your brand elements (like your logo or brand name) to prevent others having a legal basis for using them. If you’re using images, purchase them from reputable sources or ensure they are royalty-free to avoid copyright issues.
- E-commerce regulations
This includes details like pricing (including taxes), the goods or services offered, and the steps involved in completing an order.
TIP: Design your checkout process to be transparent. Show all costs upfront, and confirm orders via email to ensure that customers have all the necessary information about what they have purchased.
- Tax compliance
Every online business (trading as a sole trade or limited company) will have either income tax or corporation tax obligations. The exact taxes you need to pay will depend on your turnover. Key areas include:
VAT: If your business’s taxable turnover exceeds the current VAT threshold (£85,000 as of 2024), you must register for VAT. This involves charging VAT on goods and services and submitting VAT returns (usually every quarter).
Income tax: If you are a sole trader or a partnership, you must pay income tax on your profits. This is done through a self-assessment tax return each year.
Corporation tax: If your business is registered as a limited company, it will need to pay corporation tax on its profits. This involves registering for corporation tax when you start doing business and filing a company tax return annually. The main rate for corporation tax for the 2023/24 is 25%, which is charged against profit of more than £250,000. If your company makes a profit of less than £50,000, it may be subject to a lower “small profits” tax rate of 19%. If the company earns between these thresholds, it may be entitled to marginal relief.
TIP: Consider using accounting software tailored for small businesses to keep track of earnings, expenses, and taxes. This not only simplifies the process of submitting tax returns but also helps you understand your financial position at any point in time. Regular meetings with an accountant can ensure you are not only compliant but also taking advantage of any tax reliefs or benefits you may be eligible for.
Need legal advice for your online business?
Don’t let compliance challenges slow down your business. Rubric Law specialise in helping e-commerce businesses like yours understand and meet all regulatory requirements.
Contact us today:
0117 435 4350
