Regulation of private firms offering genetic tests to the public is about to collapse, following a decision by the government's genetic watchdog that the rules as they stand are unenforceable.

Lady Helena Kennedy, chairman of the human genetics commission, is expected to write to the government calling for the existing code of practice on genetic testing to be suspended.

The crisis has been triggered by the development of relatively cheap gene sequencing technology, enabling small firms to offer a vast range of genetic tests over the internet and by post, without involving doctors or counsellors.

A Hampshire firm, Sciona, has sought the HGC's endorsement of a "lifestyle" gene-testing service, which involves linking dietary advice to subscribers to variations in nine of their genes.

The Guardian revealed scientists' scepticism about the value and scientific basis of Sciona's products in March. Last month, the Body Shop chain, which had been selling Sciona subscription packs, withdrew them, citing lack of demand.

The HGC had been preparing to refuse Sciona recognition, but withdrew, fearing that the code failed to offer the commission protection against an expensive judicial review.

In April, after visiting Sciona's headquarters, the HGC's genetic services subgroup drafted a harsh statement declaring that the firm was not in compliance with the code of practice.

The draft, a copy of which has been seen by the Guardian, stated: "We are unaware of any sound scientific studies that have demonstrated that changing diet because of one's genetic makeup can alter health outcomes."

It went on: "The customer information does not, in our view, adequately address the potential health implications of the genetic tests."

Learning of the HGC's objections, Sciona complained about the code to the Department of Health. Last month, at a full meeting of the HGC, members expressed concern that the code as drawn up did not foresee the kind of service Sciona offered, and decided on the radical step of asking the government to suspend it.

The code, drawn up in 1997 by a predecessor body to the HGC, was written with testing in mind that only involved individuals who might be carrying a single gene variation capable, by itself, of causing a disease.

"Baroness Kennedy agreed that we would write to ministers, recommending that in the light of this there should be a wider review of the code of practice, and that ... the code of practice should be suspended," said an HGC spokesman, who requested anonymity.

"There should be replacement of the code of practice, or legislative changes."

The spokesman said that the HGC would issue a public statement about Sciona, but that it was still in talks with the company, which had been cooperative.

The HGC fears that without a radical revision of the code, Sciona could seek a judicial review of any rejection of its service.

"The issue, and I'm not being mealy-mouthed, is that the code itself is flawed to the extent that we're wondering if we do say something, as it falls out of the remit of the code, on what basis are we saying these things? Are they legally challengeable and will it end up in court?"

Sciona received a £130,373 grant from the Department of Trade and Industry.

The Department of Health said only that a review of the code of practice was under way, and that the outcome of Sciona's application for HGC endorsement "would be announced shortly".

Sciona's chief executive, Chris Martin, declined to answer questions directly. An email from the PR firm Man ning, Selvage & Lee said that the HGC's original criticisms of Sciona had been "superseded" by the commission's meeting on May 14.

"At this meeting, there was acknowledgement that the 1997 code of practice was written with serious single gene diseases in mind and that the science has since progressed to the extent that the service offered by Sciona - aimed at individual health and wellbeing - is quite different."

Sciona said that in the absence of an acceptable code it proposed to use its own ethical guidelines, drawn up by "a leading, independent UK medical ethicist".