Collagen Drink Maker Loses Tax Battle Over Health Food Classification

Minerva Research Labs, the maker of the collagen supplement Gold Collagen Pure, has failed in its appeal to have its products classified as health foods and reclaim £3.6 million in Value Added Tax (VAT).

The London-based company, founded in 2009 by Tony Sanguinetti, argued that its collagen drinks should be zero-rated for VAT because they are a type of food providing healthy nutrition. However, a tax tribunal rejected this argument, determining that the products are not "food of a kind used for human consumption."

Minerva's products, which utilize ingredients like sardine scales and cow hides, have achieved significant market success, becoming the UK's best-selling collagen drink with an annual turnover of £16 million. The supplements have also been endorsed by public figures, including TV presenter Charlotte Hawkins and former Olympic champion Dame Denise Lewis.

The company sought a refund of £3.6 million paid in VAT between 2018 and 2022, asserting they were wrongly placed in a standard VAT bracket. After the UK tax authority, HM Revenue & Customs (HMRC), refused the refund, Minerva took the case to the First-tier Tribunal.

In her judgment, Judge Anne Redston acknowledged that the products provide nourishment, containing protein and carbohydrates, and that collagen has historically been consumed in forms like bone broth. She also noted that the company's founder was initially motivated by a desire for "healthy nutrition."

However, the judge highlighted several factors that led to the decision against Minerva. The products are marketed as "liquid beauty supplements" and are purchased by consumers primarily for their cosmetic and anti-ageing benefits, rather than as a meal or snack. The tribunal also considered that the term "dose" is often used for the supplements, and that some products are specifically formulated for certain age groups and carry warnings advising consultation with a doctor, which is not typical for food items.

Furthermore, even in stores that sell food, Minerva's products are not displayed alongside food items. The judge concluded that these aspects, when weighed against the nutritional content, indicated that the products were more akin to a medicinal or cosmetic supplement than a food for general human consumption.