VAT & Food Classification
The First-tier Tribunal has held that Minerva Research Labs Ltd’s liquid collagen drinks are standard rated rather than zero rated food, dismissing an appeal worth around £3.6m.
The 18 products in issue contained marine or bovine collagen with sweeteners and fruit flavouring. Minerva showed genuine nutritional content, with one product supplying up to 23% of an adult’s daily protein requirement. The Tribunal gave that significant weight, together with the liquid form and the products being held out as nourishing bones, joints, hair and skin.
However, the Tribunal treated the way a product is held out for sale as largely answering the question, and rejected the argument that marketing only dominates in beverage or dual-use cases. The drinks were marketed as liquid beauty supplements and bought for their cosmetic and anti-ageing benefits rather than for protein or energy. They were not presented as a meal or snack, and retailers selling food did not place them in their food sections.
The packaging also counted against zero rating. The daily quantity was described as a "dose" or "treatment", language suggestive of a medicine. Cartons carried warnings to consult a doctor if pregnant or on medication, an under-18 restriction and "clinically tested" results. The warning text was required by a major retailer and Minerva's insurer, yet it still weighed against the appellant.
The Tribunal observed that if everything edible and nutritious were food, there would be no need for separate general categories within the zero rating provisions. Parliament drew the lines, and nutritional value alone does not bring a product within them.
Minerva has until around early November to seek permission to appeal, and we understand the Upper Tribunal will hear the Bottled Science appeal in October, including arguments on the weight given to marketing. Businesses selling supplements, protein products or functional drinks should review how those products are presented, whether defending a zero rate or considering a claim.
