Case: Collagen Drinks drinks are not “food” for VAT zero-rating

In Minerva Research Labs Ltd TC 10017, the First-tier Tribunal (FTT) dismissed an appeal and held that collagen drinks were not “food” for VAT zero-rating purposes, despite being edible and nutritious.

Minerva developed collagen-based products marketed as supporting skin, hair, joints and muscles. The drinks were sold standard-rated, but in March 2022 Minerva submitted an error correction notice claiming they were zero-rated as food and that VAT had been overdeclared. HMRC rejected this, concluding the products were predominantly held out as health and beauty supplements. That decision was upheld on statutory review and Minerva appealed.

It was common ground that the drinks were not excluded from zero rating as “beverages” and that a multi-factorial assessment was required to determine whether they were “food”. The FTT confirmed this must include how the products were marketed and the purpose for which they were purchased, with significant weight given to the marketing.

The products were sold in dark glass bottles, labelled as “food supplement with sweetener” or “liquid food supplement”, fruit flavoured and designed to be palatable. They contained additional vitamins and minerals and were promoted as providing nourishment for skin, hair and nails from within, as liquid beauty supplements, not suitable for under 18s. Consumers were advised to take them on an empty stomach, not to exceed the recommended daily dose, and were told the products were “clinically tested”. They were often marketed alongside breakfast-type foodstuffs but were not presented as meal replacements.

The FTT found consumers bought the products primarily for cosmetic and anti-aging benefits. Although sold in outlets that also sold food, they were not sold in the food sections. The tribunal accepted the products provided nourishment, which weighed in Minerva’s favour, and noted palatability and liquid form were food like. However, these factors were outweighed by the marketing, purpose of consumption and overall presentation as beauty supplements. The appeal was refused.