Mark Glenn Ltd v The Commissioners for HMRC

For VAT purposes, a condition may constitute a disability even where it does not physically prevent everyday activities. The assessment must include the real-world social context and the condition’s adverse effect on participation in activities involving visibility and interaction with others. A composite supply classified overall as a service may nevertheless include goods and qualify as services of adapting goods to suit a disabled person’s condition. A tribunal must explain why central evidence and submissions are accepted or rejected; stating the conclusion is insufficient. Fiscal neutrality does not require equivalent treatment where materially different supplies meet consumer needs in different ways.

Mark Glenn Ltd appealed against the First-tier Tribunal’s dismissal of its appeal concerning the VAT treatment of the Kinsey hair replacement system supplied to women with severe and patchy hair loss. The FTT held that the system was a single supply of services, that the recipients were not disabled by hair loss itself, and that the supply did not qualify under Item 3 of Schedule 8 Group 12 to the Value Added Tax Act 1994.

The Upper Tribunal considered inadequacy of reasons, fiscal neutrality, the interpretation of Item 3, the Edwards v Bairstow threshold, and whether late arguments concerning a supply of goods should be admitted. It then considered whether to remit or remake the decision.

1. Appeal allowed. The FTT’s conclusions on disability and Item 3 involved material errors of law. The decision was set aside and remade in the Upper Tribunal.
2. The duty to give reasons requires a tribunal to expose reasoning sufficient to show why the case was decided as it was. It need not address every piece of evidence, but it must confront central submissions and key evidence bearing materially on the outcome. The FTT stated its conclusion that severe female hair loss was not a disability without explaining why the medical evidence, NHS referral and funding material, case studies, and evidence of physical and psychological effects did not satisfy the relevant test.
3. Fiscal neutrality did not require the Kinsey system and wigs to receive the same VAT treatment. Differences in attachment, maintenance, suitability, and use materially influenced consumer choice.
4. The principle against artificial dissection did not prevent a composite supply classified as a service from including goods. The relevant question was whether the essential features of the service involved adapting the hairpiece and hair strands to suit the recipient’s condition.
5. “Disability” bears its ordinary meaning. The effect of a condition on everyday activities must be assessed in its real-world social context, not solely by asking whether it physically prevents the activity. Severe and patchy hair loss in the women concerned constituted an impairment adversely affecting work, leisure, socialising, self-care, and caring for others.
6. The hairpiece and hair strands were fitted, anchored, and maintained according to each woman’s individual pattern of hair loss. Those services adapted goods to suit the condition of disabled persons and fell within Item 3 of Group 12. They were therefore zero-rated.
7. The FTT’s conclusion was not perverse under Edwards v Bairstow; different tribunals could reasonably have reached different evaluative conclusions. The late challenge to the finding that the supply was one of services rather than goods was refused because it caused procedural prejudice and undermined fairness and certainty.

• Upper Tribunal (Tax and Chancery Chamber): allowed the appeal, set aside the relevant parts of the FTT decision, and remade the decision.
• First-tier Tribunal (Tax Chamber): in Mark Glenn Ltd v HMRC [2024] UKFTT 715 (TC), dismissed the appeal and held that the Kinsey system was standard-rated.