Illuminate Skin Clinics Ltd v The Commissioners for HMRC
[2023] UKFTT 547 (TC)
Mark Glenn Ltd v The Commissioners for HMRC
1 August 2024
[2024] UKFTT 715 (TC)
First-tier Tribunal
A company providing a hair replacement system appealed a VAT assessment. The judge ruled that the hair system, though helpful for people with hair loss, isn't tax-free because hair loss isn't considered a disability on its own and the service is a single, not separate, process.
Key Facts
- •Mark Glenn Ltd (Appellant) appeals against VAT assessments totaling £277,083.10 for allegedly underdeclared output tax.
- •The appeal centers on whether the 'Kinsey System,' a hair integration technique, qualifies for zero-rating under Schedule 8 Group 12 of the Value Added Tax Act 1994 (VATA94).
- •The Kinsey System involves a multi-stage process, including consultation, custom wig creation, fitting, and ongoing maintenance.
- •The Appellant argued that the system qualifies for zero-rating as a service adapting goods for disabled persons or as a supply of zero-rated goods themselves.
- •HMRC argued the Kinsey System is a single, standard-rated service, not the supply of goods, and that significant hair loss isn't a disability in itself.
Legal Principles
Zero-rating provisions are derogations from the general principle that supplies of goods and services are taxable and should be interpreted strictly.
VATA94, Section 30; Talacre Beach Caravan Sales Ltd v HMRC [2006] STC 1671
A strict interpretation is not the same as a restrictive interpretation; the supplier must establish that they come within the exemption.
Lanyst Limited v HMRC [2016] UKFTT 0372 (TC)
Definition of 'disabled person' under Schedule 8, Group 12, VATA94 and VAT Notice 701/7, referencing the Equality Act 2010.
VATA94 Schedule 8, Note 3; VAT Notice 701/7; Equality Act 2010, section 6
A transaction should not be artificially dissected; the correct classification should reflect social and economic reality.
Benyon and Partners v. Her Majesty’s Commissioners of Customs & Excise [2004] UKHL 53
Outcomes
Appeal dismissed; the Kinsey System is standard-rated for VAT purposes.
The Tribunal found that significant hair loss is not a disability in itself. The Kinsey System was deemed a single supply of services, not the adaptation of goods, and therefore did not meet the criteria for zero-rating under Schedule 8 Group 12 of VATA94.