Minerva Research Labs Loses £3.6m VAT Challenge Over Collagen Drinks

Minerva Research Labs loses £3.6m VAT challenge as tribunal rules collagen drinks are not food

The manufacturer behind Gold Collagen Pure, the best selling collagen drink in the UK, has lost a legal challenge against a £3.6 million tax bill after a tribunal ruled its products cannot be classified as food for value added tax purposes.

London based firm Minerva Research Labs had challenged HM Revenue and Customs following an unsuccessful attempt to secure a tax refund. The company argued that its anti ageing liquid supplements should be zero rated for VAT as food delivering healthy nutrition, rather than treated as a beauty product or medicine.

However, Judge Anne Redston, sitting in the tax chamber of the First tier Tribunal, dismissed the appeal. Delivering the decision, Judge Redston noted that while the drinks provide nutritional value, they are marketed and purchased primarily for cosmetic benefits rather than as food or a snack.

Minerva was founded in 2009 by entrepreneur Tony Sanguinetti, who established the business after researching collagen based drinks in Japan. The company now generates an annual turnover of around £16 million. Its flagship product, Gold Collagen Pure, uses hydrolysed marine collagen derived from fish scales and hydrolysed bovine collagen sourced from cow hides. The brand has been promoted by several high profile figures, including model Yasmin Le Bon, television presenter Charlotte Hawkins, and former Olympic champion Dame Denise Lewis.

The legal dispute arose after an HMRC inspector rejected Minerva's application to reclassify its range. The tax authority concluded that the products are predominantly sold as health and beauty supplements and taken by consumers for their anti ageing properties.

Minerva appealed to the tax tribunal, contending that the drinks provide a nutritional blend acting as a building block for skin, hair, joints, and muscles.

In her written judgment, Judge Redston acknowledged that the protein content in the drinks provides genuine nourishment, which supported the company's case. She noted that the products supply between 8 per cent and 23 per cent of a man's daily protein requirement, and between 6 per cent and 13 per cent of a woman's requirement.

"Since the purpose of food is to provide nourishment for the body, we have found this to be a weighty factor supporting the appellant's case."

However, the tribunal found that other operational and marketing factors weighed heavily against the business. Judge Redston pointed out that Minerva typically refers to the recommended daily amount as a dose or treatment, language more commonly associated with medicine than food. Furthermore, the products are sold as liquid beauty supplements, placed outside food sections in retail outlets, and carry warnings advising pregnant or breastfeeding women to consult a doctor.

"Minerva usually refers to the quantity a person should consume every day as a 'dose', with occasional references to it as a 'treatment' and a 'serving'."

"The products are also held out for sale as liquid beauty supplements...and the reviews and social media posts concerning the products demonstrate that consumers purchase the products for their cosmetic and anti-ageing benefits."

"The products are not marketed to be eaten instead of a meal, or even as a snack. Although they are sold via some outlets which also sell food, they are not positioned alongside food products."

Addressing the claim that pleasant taste or historical consumption of bone broth made the item a food, the judge clarified the distinction between traditional foodstuffs and processed supplements.

"There is no dispute that collagen in the form of bone broth has been consumed for centuries and was thus 'food of a kind used for human consumption'."

"However, that is not this case: the products are not the same as bone broth, but instead a condensed, processed form of hydrolysed collagen from fish scales and hides. The fact that the products taste nice doesn't mean that purchasers are buying them as a food."

Concluding the ruling, Judge Redston stated that the multi factor assessment clearly demonstrated the items fall outside the statutory definition of food for human consumption, upholding HMRC's £3.6 million tax assessment.

Source: Independent UK