VAT & Disability Relief

In a recent VAT case, Mark Glenn Ltd (MGL) challenged HMRC over whether its “Kinsey System” - a bespoke hair replacement service for women with severe hair loss - should be zero-rated for VAT as an aid for disabled people. The case went all the way to the Upper Tribunal, and the outcome could have wider implications for similar businesses.

MGL argued that its service, which involves fitting and adapting a custom hairpiece for women suffering from severe and patchy hair loss, should be zero-rated under the group designed for certain goods and services supplied to disabled people, including “services of adapting goods to suit [a disabled person’s] condition.”

HMRC disagreed, saying the service was standard rated, not zero-rated, because they didn’t consider severe hair loss in women to be a “disability” for VAT purposes.

The First-tier Tribunal (FTT) sided with HMRC, finding that significant hair loss in women wasn’t, in itself, a disability. They also said the Kinsey System was a single supply of services, not a service of adapting goods.

However, MGL appealed and the Upper Tribunal took a broader view, considering not just the physical effects of hair loss but also the social and psychological impact. They recognised that, for women, severe hair loss can have a profound effect on daily life due to societal expectations and stigma.

The Upper Tribunal ruled that severe and patchy hair loss in women does amount to a disability for VAT purposes. They also found that the Kinsey System’s process - fitting and maintaining a hairpiece tailored to each client - qualified as “adapting goods to suit [the] condition.” As a result, these supplies should be zero-rated for VAT.

This decision clarifies that “disability” for VAT relief can include conditions with significant social impact, not just physical limitations. It’s a win for businesses providing bespoke aids to those with disabling conditions, and a reminder that VAT law can adapt to real-world experiences.