Upper Tribunal Rules in Favour of Business in VAT Dispute with HMRC
A recent Upper Tribunal ruling in the case of Bottled Science Limited v HMRC [2026] UKUT 00429 (TCC) has highlighted the complexities surrounding VAT classifications and the importance of challenging HMRC decisions where businesses believe the legislation has been incorrectly applied.
The case concerned the VAT treatment of ‘Skinade’, a liquid collagen product marketed for its skincare benefits, and whether it should be classified as food intended for human consumption and therefore qualify for zero-rated VAT.
Background to the case
Bottled Science Limited had sought to recover approximately £1.25 million in VAT, arguing that its product should be zero-rated rather than subject to VAT at the standard rate of 20%. HMRC rejected the claim, maintaining that the product did not qualify for zero-rating under the relevant legislation.
The matter was initially considered by the First-tier Tribunal, which agreed with HMRC’s position. However, Bottled Science Limited subsequently appealed the decision to the Upper Tribunal, challenging the way in which the legislation had been interpreted and applied.
The Upper Tribunal’s decision
In its judgment published on 4th November 2026, the Upper Tribunal found that the First-tier Tribunal had made an error in its interpretation of the legislation, particularly in relation to the definition of food and the provision that food includes drink.
As a result, the Upper Tribunal allowed the company’s appeal on this ground and directed that the case be reconsidered by a differently constituted First-tier Tribunal.
While the decision represents a successful challenge by Bottled Science Limited, it does not establish that the product is automatically entitled to zero-rated VAT. This will need to be determined when the case is reconsidered.
What does this mean for businesses?
The case demonstrates that disputes over VAT classifications are not always straightforward, particularly where products do not fall neatly within established categories. For businesses operating in sectors such as food, drink, health and wellbeing, the way in which products are classified for VAT purposes can have significant financial implications.
It also highlights that HMRC’s interpretation of the legislation can be challenged, and that businesses should not necessarily accept an assessment or decision where there are reasonable grounds to dispute it.
How Rogers & Norton can help
At Rogers & Norton Solicitors, our specialist HMRC Tax and VAT Investigations service supports businesses facing investigations, assessments and disputes with HMRC. We understand the financial and commercial pressures these matters can place on businesses, particularly where substantial sums are involved, and the importance of challenging decisions where there are grounds to do so.
Peter Hastings, Director and Head of Litigation, has extensive experience representing businesses in disputes with HMRC, including challenging VAT assessments and pursuing appeals where appropriate.
If your business is facing an HMRC investigation, has received a VAT assessment or believes a decision has been made incorrectly, Peter and our Litigation team can advise you on your legal position and the options available to protect your business. To find out more, visit our HMRC Tax and VAT Investigations webpage, or to book an appointment, please contact Peter Hastings, Director and VAT dispute specialist by emailing ph@rogers-norton.co.uk
*This article is provided for general information purposes only and does not constitute legal or other professional advice.