Particular trades: direct selling or party plan sales: how does direct selling work?
A number of companies use a system known as ‘direct selling’ or ‘party plan’, under which their products are sold to the public by individuals who are not registered for VAT. This system is particularly common for sales of cosmetics, jewellery, and household appliances. Typically, the manufacturer will sell the products on to an authorised wholesale distributor, who will then pass the goods on to an unregistered dealer to effect the final sale, often by way of a hostess party.
For the purposes of this guidance, we will refer to the unregistered individual as the ‘dealer’, and to his registered supplier as the ‘distributor’.