The sale of puppies under eight weeks old is to be banned in the biggest reform of the pet trade for 20 years.

There will also be a clampdown on puppy farms, with anyone breeding more than two litters a year required to obtain a licence and be inspected by their local authority. At present only those breeding more than four litters a year need a licence.

Any seller requiring a licence, including those selling online, will have to display the permit in advertisements. They will also have to give new owners information about animal welfare and the need to ensure that their pets enjoy the “five freedoms”, including freedom to express normal behaviour and freedom from discomfort, fear and distress.

More than 700,000 puppies are sold each year in a trade worth up to £300 million and 88 per cent come from unlicensed breeders. Many puppies are removed from their mothers before they are eight weeks old, often resulting in behavioural and health problems.

The Department for Environment, Food and Rural Affairs, which is today publishing the plans for tighter control of puppy sales in England, said it was focusing on “backstreet puppy breeders” who would face an unlimited fine and six months in prison if they broke the rules.

However, the government has rejected calls by MPs and animal charities for a ban on puppy sales by third parties.

Neil Parish, Conservative chairman of the Commons environment, food and rural affairs committee, which published a report on the pet trade in November, said the plans did not go far enough.

“I am unhappy that the government has not followed our suggestion to ban the third party sale of dogs, as I believe this would have had a large impact on the condition of dogs sold,” he said.

“The government’s own advice for a buyer to see a puppy with its mother is contradicted by the ability of third parties to sell puppies.”

Mr Parish claimed that the government should have required anyone breeding more than one litter a year to have a licence.

“The majority of animal charities we heard from advocated that anyone selling two litters or more per year should be licensed as a breeder. This is a lost opportunity to bring more breeders under the licensing regime,” he said.

Andrea Leadsom, the environment secretary, said: “We are cracking down on the worst offenders by strengthening the dog breeding licence and giving councils the power they need to take action.

“With more and more pet sales now taking place on the internet, it’s right that this market is subject to the same strict licensing criteria as other breeders and pet shops so that consumers are not misled.”

The British Veterinary Association said the changes would improve the welfare of puppies but it wanted the government to go further and require anyone breeding from a dog to register with their local authority.

A puppy farm gang received suspended prison sentences yesterday and were each ordered to do 120 hours of unpaid work over the fraudulent sale of dogs.

The three women and a man admitted fraud at Basildon crown court.