Maker of anti-ageing tonic endorsed by Charlotte Hawkins and Dame Denise Lewis loses fight against £3.6million tax bill after arguing its products should be classified as health food

The maker of an anti-ageing tonic endorsed by celebrities including Charlotte Hawkins and Dame Denise Lewis has lost a £3.6million tax bill fight after unsuccessfully arguing its products should be classified as health foods.London-based entrepreneur Tony Sanguinetti, 59, founded beauty company Minerva Research Labs Ltd in 2009 to produce collagen supplements after becoming 'obsessed with finding a way to reverse the signs of ageing'.Using ingredients such as waste sardine scales and cow hides, the company's range helped it grow to an annual turnover of £16million, with it now producing the best-selling collagen drink in the UK, Gold Collagen Pure.Minerva's products have been advertised and endorsed by stars including Yasmin Le Bon, TV presenter Charlotte Hawkins and former Olympic champion Dame Denise Lewis.But in 2022 the company asked the taxman to hand back £3.6million it had paid since 2018, claiming that it had been classified in the wrong tax bracket and ought to have been 'zero rated' for VAT.After HMRC refused the refund, the company took the case to a tax tribunal, arguing that its supplements ought to be regarded as a 'food' providing 'healthy nutrition' for tax purposes, rather than being more akin to a 'medicine'.It argued its signature beauty drink provides customers with 'the perfect blend of nutritional ingredients to act as a building block for great skin, great hair, functional joints and muscles'.But Judge Anne Redston, sitting in the tax chamber of the First-tier Tribunal, rejected Minerva's bid to avoid the massive tax bill. London-based entrepreneur Tony Sanguinetti, 59, founded beauty company Minerva Research Labs Ltd in 2009 to produce collagen supplements after becoming 'obsessed with finding a way to reverse the signs of ageing'Giving judgment, she said the products are not marketed to be taken as a meal or snack and that just because they 'taste nice doesn't mean that purchasers are buying them as a food'.'The sole issue for determination was whether the products were "food of a kind used for human consumption" and so zero-rated,' she said.The products, which contain either hydrolysed marine collagen made from fish scales by a French firm, or hydrolysed bovine collagen produced from cow skin or hides by a German company, are 'consistently held out as providing nourishment for bones, cartilage, muscles, joints, hair and skin,' the judge said.She acknowledged: '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.'But she added Minerva usually refers to customers taking a daily 'dose' of the supplements, and only occasionally as a 'treatment' or '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.'A number of factors are indicative of a medicine rather than a food. In our judgment... the products are not "food for human consumption."'The tribunal heard that Mr Sanguinetti, who grew up in Italy, founded Minerva in 2009 and 'became slightly obsessed with finding a way to reverse the signs of ageing'. His products have been endorsed by the likes of Charlotte Hawkins (centre) and Dame Denise Lewis (right)In the same year he travelled to Japan, where collagen drinks were on sale and began to research and test how to produce collagen-based drinks in Europe.Minerva's first products were created in 2011, with the help of Japanese partners, and Gold Collagen Pure launched in the UK in June of that year.He told the tribunal that, anxious about getting his goods through customs and with no equivalent product in the UK, he accepted the customs code given to him and Minerva paid VAT at the standard rate.'Since then, Minerva has developed a range of products, all based on collagen,' said the judge. 'Mr Sanguinetti described them as "perfect blend of nutritional ingredients to act as a building block for great skin, great hair, functional joints and muscles". Gold Collagen Pure is now the best-selling collagen drink in the UK.'The case ended up before the tribunal after an HMRC inspector refused Minerva's request to reclassify the products as food.The inspector had found the products were 'predominately held out for sale as a health and beauty supplement' and that, despite having nutritional benefits, 'are primarily taken by the consumer for their anti-ageing properties'.Backing HMRC's stance, the judge said the products are sold as a 'liquid beauty supplement', adding, 'We find as a fact, having considered all the evidence, that consumers purchase the products for their cosmetic and anti-ageing benefits.'Some of the outlets sell food as well as beauty products, but... we find that the outlets which also sell foods do not sell the products as part of the food sections of their stores or their websites.'The fact that the products are "food supplements" indicates no more than that they are edible, have been added to food and must meet various regulatory requirements.'That does not help us answer the statutory question, namely whether what has been added to the food is itself "food of a kind used for human consumption."The judge said that the products provide nourishment and contain between 8% and 23% of a man's daily protein requirement, and 6% and 13% of a woman's, as well as carbohydrate. She said the nourishment provided by the products is a key part of Minerva's marketing and that its first products were born out of Mr Sanguinetti's interest in 'healthy nutrition'.'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,"' she continued.'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.'She added they are not marketed to be eaten instead of a meal or snack, and that when sold in retail stores that also sell food, they are never located in the food area.'Some of the products are sold as 'specially formulated' for particular age groups, and all are marketed as "not suitable for under the age of 18".'Although some foods, notably alcohol, are subject to age restrictions on sale, it is generally atypical for the sale of foods to be restricted in this way.'All the products are labelled with 'precautions' or 'warnings' so that customers are warned to consult their doctor if they are pregnant, breastfeeding or on medication. That too is not characteristic of foods.'We considered that the factors in the appellant's favour were outweighed by those on the other side of the scales.'In our judgment, the outcome of the multi-factorial test is that the products are not 'food for human consumption,' the judge concluded.