Mark Glenn Ltd v The Commissioners for HMRC

The skeleton argument of the Appellant submitted, in the first instance, that Item 3 of Schedule 8 was met in that there is a supply to a disabled person of services of adapting goods to suit his condition. It was stated that there “is a supply of services adapting the individual fibres into the mesh to specifically address the individual hair loss suffered, which is unique to each client’s hair loss. This includes a team of 2 people individually working to thread the fibres together ...”.

Alternatively, it was submitted in the skeleton argument of the Appellant that Item 2(g) of Schedule 8 is met if it is determined that there has been a supply of a good or alternatively, that Item 2(a) is met. Item 2(g) relates to equipment and appliances (not included in paragraphs (a) to (f) of Item 2) designed solely for use by a disabled person. Item 2(a) relates to medical or surgical appliances designed solely for the relief of a severe abnormality or severe injury.

It was submitted also that Item 5 applies to the maintenance appointments every six weeks that form part of the Kinsey System, as this is the supply ‘to a disabled person …of a service of repair or maintenance of any goods specified in item 2’.

The skeleton argument of the Respondents avers that the Kinsey System is a service provided by the Appellant to their customers. It is stated that the principal service is “one of installing and assembling the silk wig mask onto the client’s head. The mask cannot be purchased separately and cannot be installed without the expertise of the “hair angels” employed by the Appellant. The service is also one of continuing obligation as the clients are expected to return every 6-weeks or so for the wig to be inspected and re-attached due to the wig growing away from the scalp”. It was also asserted by the Respondents that the Kinsey System is a single supply of a service and that the Appellant’s service is not one of adaptation, repair or maintenance of goods for disabled persons.

At the hearing, it was agreed by the parties at the point of submissions that the Kinsey System is the supply of a service and not the supply of a good.

At the hearing, we were shown two videos provided by the Appellant. One video, entitled ‘Caroline’s Story’, demonstrated the Kinsey System. The other video, entitled ‘The Hair of My Dreams’, demonstrated the hair extension product of the Appellant. The Appellant accepts that its hair extension offering is standard-rated for VAT purposes.

The witness statement of Mr Kinsey details the client journey involved with the Kinsey System. It starts with a consultation in-person at the London studio of the Appellant (‘the Consultation’). If the client is suitable, the procedure and pricing is explained to the client. The next part of the client journey involves a swatch of colour-matched hair for the client being sent to the wigmaker of the Appellant to manufacture the initial wig (‘Wigmaker Pre-Preparation’). This is a custom-made wig.

The following part of the client journey (‘Fitting and Adaptation of the Wig’) is when the wig is placed over the area of hair loss alongside additional wig mesh where necessary. It is stated (at paragraphs 38 and 39 of Mr Kinsey’s statement) that: “Any existing strands of human hair underneath the mesh are pulled through the mesh using a crotchet needle. The wig then sits in place like a “second skin” with native hair poking through the mesh alongside the wig hair. The wig is held in place at various anchor points using baby-fine connections whereby human hair surrounding the loss is attached to colour-matched fibre hair using a four-stem braid technique. Whilst a traditional adhesive could be used, this technique means that healthy hair doesn’t need to be shaved or hidden away and is instead integrated into the style”.

Additionally, it is stated that where necessary the wig is then adapted by filling it out with additional fibre hair that is attached to the mesh itself using a needle. The statement of Mr Kinsey details that: “In this instance, we’re effectively turning “half a wig” into a full wig by the addition of more colour-matched hair”. The hair is then styled and cut to complete the look and the client typically returns every 6 weeks for maintenance of the system which involves re-attachment of the wig mesh and any ongoing styling necessary. It is stated that without this maintenance of re-anchoring, the mesh would become loose and put stress on the existing stable hair causing breakage.

It is clear to us that the Kinsey System consists of several parts which are all connected. The ‘Fitting and Adaptation of the Wig’ part of the Kinsey System takes two people working at the same time approximately 8 hours to complete after which there is a process of ongoing maintenance that takes place every 6 weeks where significant input from the Appellant’s staff is again required. The typical cost to the client of the Kinsey System is approximately £2389 which excludes the maintenance cost every 6 weeks. The maintenance cost, in total, amounts to in the region of £2400 annually. We agree with the parties and find that the Kinsey System is the supply of a service and not the supply of a good.

It is not in dispute between the parties that the zero-rating provisions are derogations from the general principle that supplies of goods and services are taxable and that the provisions should be interpreted strictly. In that respect, we were referred to the case of Talacre Beach Caravan Sales Ltd v HMRC [2006] STC 1671 (at paragraph 23) which states: “…as the Court has pointed out on a number of occasions, the provisions of the Sixth Directive laying down exceptions to the general principle that VAT is to be levied on all goods or services supplied for consideration by a taxable person are to be interpreted strictly”.

Ms Sheldon for the Appellant made the point, which we accept, that a strict interpretation is not the same as a restrictive interpretation as was held in the case of Lanyst Limited v HMRC [2016] UKFTT 0372 (TC).

In the case of Lanyst, it was stated (at paragraph 19) that: “A strict interpretation is not the same as a restrictive interpretation. As Chadwick LJ said in Expert Witness Institute v Customs and Excise Comrs [2002] STC at [17] (and endorsed by the Court of Appeal in InsuranceWide.com Services Ltd v Revenue and Customs Comrs, Revenue and Customs Comrs v Trader Media Group Ltd [2010] STC 1572 at [83]:

For Item 3 of Schedule 8 to be met, the supply must be one to a disabled person of services of adapting goods to suit his condition.

Turning to a consideration of the meaning of ‘disabled person’, the Notes to Schedule 8 state that: “Any person who is chronically sick or disabled is “disabled” for the purpose of this Group”.

VAT Notice 701/7 (which is HMRC Guidance) states, as referred to above, that a person is ‘chronically sick or disabled’ “if they are a person with a:

physical or mental impairment which has a long-term and substantial adverse effect on their ability to carry out everyday activities

condition which the medical profession treats as a chronic sickness, such as diabetes….”

We were referred also to the definition of a disability in section 6 of the Equality Act 2010 which states:

“A person (P) has a disability if-

A reference to a disabled person is a reference to a person who has a disability”.

The Equality Act 2010 replaced the Disability Discrimination Act 1995 as well as several pieces of legislation covering discrimination.

Comparing the wording in VAT Notice 701/7 (at 3.2.1) to that in section 6 of the Equality Act 2010, the wording is very similar. VAT Notice 701/7 refers to the ‘ability to carry out everyday activities’ whereas section 6 of the Equality Act 2010 refers to the ‘ability to carry out normal day-to-day activities’. We do not consider that there is any material difference between the wordings in that respect.

The Appellant submits, in relation to what constitutes a disability, that significant hair loss in women should be considered as a disability in itself. The skeleton argument of the Appellant states (at paragraph 38): “That significant hair loss should be treated in and of itself as a disability for these purposes, i.e. because it is a physical impairment which has a long-term impact and substantial adverse effect on the ability to carry out everyday activities…”. We were referred to the evidence of Mr Kinsey at the hearing who stated that hair loss effects women’s lives in so many ways and that it impacted every area of their lives. Mr Kinsey also referred several times in his witness statement to ‘disabling hair loss’.

Ms Sheldon referred us to the case study of Clare McKenna and to the two letters dated 18 May 2005 from Mr Martin Kelly (Consultant Craniofacial and Plastic Surgeon). The case of Ms McKenna is described by Mr Kelly as follows: “This is a girl with neurofibromatosis who suffered a surgical mishap in Scotland many years ago. As a result, she lost part of her skull and overlying hair. We have successfully picked up the pieces for her here at Chelsea and Westminster and the remaining piece of the puzzle that is missing is to afford her a hairpiece that will cover her disfiguring alopecia”.

Ms Sheldon directed us also to a letter (undated) from Dr Sarah Riley addressed ‘To any whom it may concern’. Dr Riley is stated as being a practising General Practitioner at the Putney Mead Medical Centre in London. This letter stated (amongst other points) that:

We were referred as well to an article in October 2009 from the magazine Wedding Ideas. This article, in summary, detailed the situation of Lucy Perkins who was a 26-years old person who had been diagnosed with leukaemia and who had been given the all-clear after several sessions of chemotherapy. However, the chemotherapy treatment that she had received had resulted in hair loss. Ms Perkins was soon to be married and the article details how she made use of the Kinsey System which transformed her look.

The Respondents maintain that significant hair loss in women should not be considered as a disability in itself. Ms Ameerally for the Respondents emphasised the distinction between the hair loss in itself and the underlying cause of the hair loss. It was stated that significant loss or baldness does not necessarily have a long-term and substantial adverse effect upon the ability of an individual to carry out everyday activities.

With reference to the letter of Dr Riley and the causes of hair loss referred to in that letter, it was stated by Ms Ameerally that alopecia does not in itself limit the ability of an individual to carry out everyday activities. Reference was made also to accidental hair loss which, Ms Ameerally submitted, could occur without a chronic illness or disability.

Ms Sheldon made the point that there is very little case law directly on the issue of significant hair loss or baldness and whether or not it constitutes a disability. We were referred to the case of Campbell v Falkirk [2008] EAT (unpublished). That decision (non-binding) applied the law as it was under the Disability Discrimination Act 1995. The case considered baldness in the context of a man. Mr Campbell was a teacher in a school who alleged that he had been harassed and subjected to name-calling with reference made to his baldness. Mr Campbell asserted that his baldness was a physical impairment and that it constituted a disability.

It was held by the Employment Tribunal (at paragraph 15) that: “The claimant’s position is that baldness is an impairment. Judging that against the Guidance, case law and applying the ordinary meaning of impairment, I am of the view that baldness is not an impairment. It seems to me to take the definition of impairment too far if baldness of itself is to be regarded as being an impairment. It is an aspect of physical appearance, in effect, when unrelated to any other illness. If baldness was to be regarded as an impairment then perhaps a physical feature such as a big nose, big ears or being smaller than average height might of themselves be regarded as an impairment under the DDA”.

We were referred also to the case of Finn v The British Bung Manufacturing Company [2022] EAT (unpublished). That case involved a complaint of harassment in which the baldness of Mr Finn had been commented upon with the use of offensive language by a work colleague. It was stated by the Employment Tribunal (at paragraph 235) that: “In our judgment, there is a connection between the word “bald” on the one hand and the protected characteristic of sex on the other. Miss Churchouse was right to submit that women as well as men may be bald. However, as all three members of the Tribunal will vouchsafe, baldness is much more prevalent in men than women. We find it to be inherently related to sex. (In contrast, we accept that baldness affects (predominantly) adult males of all ages so is inherently not a characteristic of age)”.

Neither party provided us with any information or statistical evidence relating to the actual incidence of baldness in men as compared to women but we have no hesitation in finding that baldness is more prevalent in men than in women.

In respect of the Equality Act 2010, we were referred to the definition of disability at section 6 but not to Schedule 1 (Disability: Supplementary Provision) of the Act. The Equality Act 2010 does not contain a list of disabilities although certain medical conditions expressly are stated to be a disability. Section 6 (Certain medical conditions) of Schedule 1 states, at 6(1), that: “Cancer, HIV infection and multiple sclerosis are each a disability”.

Neither did either party make any express submissions relating to the specific meaning of ‘impairment’ nor as to the specific meaning of ‘chronic illness’ which appear in VAT Notice 701/7.

In relation to the meaning of ‘chronic illness’, the Appellant did not adduce any medical evidence to assert that significant hair loss or baldness in women is considered as a chronic sickness by the medical profession. The letters from Mr Kelly and Dr Riley do not make any statement to that effect. We find, based upon the available evidence, that significant hair loss or baldness in women is not treated as a chronic illness by the medical profession and we find that it is not a chronic illness.

In respect of the meaning of impairment, reference was made to this in the case of Campell (at paragraph 14) although neither party made reference to it. A non-exhaustive list of different types of impairment that may arise was referred to in the case of Campbell. These included: sensory impairments (such as those affecting sight or hearing); impairments with fluctuating or recurring effects such as rheumatoid arthritis, myalgic encephalitis (ME)/chronic fatigue syndrome (CFS)….; progressive (such as motor neurone disease…); organ specific, including respiratory conditions such as asthma and cardiovascular diseases including thrombosis, stroke and heart disease; learning difficulties...

Based upon the evidence available to us, and on a balance of probabilities, we are not inclined to find that significant hair loss or baldness in women is an impairment. In any event, if we had found that significant hair loss or baldness in women is an impairment, we do not find that it has a long-term and substantial adverse effect on the ability of women to carry out everyday activities. In reaching that conclusion, we understand fully and have taken into account the instructive and helpful comments that Mr Kinsey made at the hearing about the transformative impact that the Kinsey System can have.

In summary, having considered carefully the submissions of the parties on this point, we find that significant hair loss or baldness in women is not, in itself, a disability. We find that significant hair loss or baldness in women does not fall within the wording of Note 3 to Schedule 8 of Group 12 VATA94 or VAT Notice 701/7 (or of section 6 of the Equality Act 2010).

The Appellant submits also that, if it is not accepted that significant hair loss or baldness in women is a disability in itself, then those who are suffering from a serious illness or disability nonetheless fall within Item 3 of Schedule 8. In this respect, Ms Sheldon referred by way of examples to anxiety and depression resultant from alopecia, to cancer, and to trichotillomania (an urge to pull out hair). We were referred also to the eligibility declaration for goods and services for disabled people and charities serving their needs in relation to which a person must declare that they are chronically sick or have a disabling condition and must give a full and specific description of their condition. Ms Ameerally stated, in respect of the eligibility declaration, that production of the eligibility declaration does not automatically justify the zero-rating of a supply and that completion of the eligibility declaration by clients is not a pre-requisite for using the Kinsey System.

The Respondents submit that the Kinsey System was not designed solely for use by disabled people and that those who are not disabled can and do use the Kinsey System as in the case of those, as referenced by Dr Riley, who suffer from accidental hair loss. That said, it was not disputed by the Respondents that a proportion of the clients of the Appellant who use the Kinsey System do so after loss of hair due to a chronic illness or disability. In that respect, Ms Ameerally emphasised that the loss of hair resultant from treatment for cancer (by way of example) is not a disability in itself but that the disability is the cancer itself. That, we find, is demonstrated in the case of Ms Perkins referred to earlier.

Having found that significant hair loss or baldness in women is not, in itself, a disability, we find that there could be clients of the Appellant who make use of the Kinsey System who meet the definition of a disabled person such as Ms Perkins who was suffering from cancer which is recognised as a disability (and specifically stated as being a disability in the Equality Act 2010). That said, in our view, the significant hair loss or baldness in itself would not be a chronic sickness or disability.

The Appellant maintains, in their skeleton argument, that there is a supply of services of adapting the individual fibres into the mesh to specifically address the individual hair loss suffered which is unique to each client’s hair loss and that this includes a team of two people individually working to thread the fibres together. At the hearing, Mr Kinsey gave evidence that the wig received from the wigmaker was adapted to the size of the client’s head and to the position where it should be on the head and then areas of the mesh would need to be filled.

The Respondents contend that the Kinsey System should be seen as a service as a whole and that the parts of the client journey as described by Mr Kinsey all form part of an overall service provided. What Mr Kinsey described as the fitting and adaptation of the wig was not adapting a wig, not adapting goods, but involved integration and brought with it a continuing obligation that required a labour-intensive maintenance of the Kinsey System every six weeks. The process referred to by Mr Kinsey as ‘adaptation of the wig’ was not one of adaptation but rather one of attachment and integration as described by Mr Kinsey in his witness statement (at paragraph 44).

Ms Ameerally submitted that to consider the Kinsey System as the supply to a disabled person of services of adapting goods to suit his condition is to artificially break up the Kinsey System for the purpose of establishing a VAT rating. It was submitted that the Kinsey System is not a wig nor the adaptation of a wig but a hair integration technique that allows for a semi-permanent transformation and which requires regular, ongoing maintenance.

In that respect, we were referred by Ms Ameerally to the case of Benyon and Partners (Respondents) v. Her Majesty’s Commissioners of Customs & Excise (Appellants) [2004] UKHL53. That case concerned a partnership of doctors in general practice within the NHS located in a rural area with patients not within easy reach of a pharmacy. The doctors were, therefore, permitted to dispense prescription drugs directly to those patients in the same way as a pharmacist would. Prescription drugs dispensed by a pharmacist were stated to be zero-rated for VAT and the practice registered for VAT so as to be able to obtain a refund of the input tax on the drugs it dispensed. The practice also claimed the input tax on drugs, such as vaccines, which the doctors personally administered to patients.

The Customs and Excise Commissioners took the view that “the personal administration of a drug by a doctor constituted a supply of medical services, rather than a supply of drugs, and as such the transaction was exempt from VAT and the input tax could not be recovered”. The Court of Appeal decided, however, that the personal administration of a drug involved both a supply of goods, in the provision of the drug, and a supply of services, in its administration, and that, consequently, the input tax was recoverable.

The House of Lords, though, held that “a transaction should not be artificially dissected; that the level of generality which corresponded with social and economic reality was to regard the transaction as the patient’s visit to the doctor for treatment and not to split it into smaller units; that on such a view the correct classification of the personal administration of drugs to patients was as a single supply of services…”.

Having considered the arguments of both parties, we do not accept that the Kinsey System can be considered as the supply to a disabled person of services of adapting goods to suit his condition. We do not find that the Kinsey System can be seen as the adaptation of a wig. We find that the Kinsey System is a labour-intensive system which allows for a semi-permanent transformation. We find that it requires ongoing, regular maintenance a number of times on a six-weekly basis after fitting. We find also that maintenance is an essential part of the Kinsey System. We find that to consider the Kinsey System as one of services of adapting goods to suit his condition would be to dissect artificially what the Kinsey System does. We find that the Kinsey System is a single supply of services and that it does not, therefore, fall within Item 3 of Schedule 8 of Group 12 VATA94.

Ms Sheldon referred us to Part 4.2 (Medical and surgical appliances) of VAT Notice 701/7 and, specifically, to wigs being an example of an eligible item for zero-rated appliances. Ms Sheldon made the point that if wigs that were a medical and surgical appliance were a zero-rated item, then the Kinsey System which was a better and safer method should also be treated as zero-rated. It was submitted that fiscal neutrality is a key feature of the VAT system and that the VAT system should not distort competition between suppliers. There would be scope for this if a wig (that fell within medical or surgical appliances) could be zero-rated for VAT purposes but the Kinsey System was found to be standard-rated.

Part 4.2.1 states that: “A medical or surgical appliance is a device or piece of equipment that’s designed solely for the relief of a severe impairment or severe injury. Examples of severe impairments or severe injuries include amputation, rheumatoid or severe osteo-arthritis, severe disfigurement, congenital deformities, organic nervous diseases, learning disabilities and blindness”. Included within eligible items of zero-rated appliances are, amongst other items, artificial limbs, artificial respirators, heart pacemakers, invalid wheelchairs and wigs.

Ms Ameerally stated, which is agreed between the parties, that the Kinsey System is not a wig. Ms Ameerally also made the point that the Kinsey System was not designed solely for the relief of a severe impairment or severe injury given that it could, for example, be used by those who had suffered from accidental hair loss.

We recognise the point made by Ms Sheldon although we find that wigs which fall within the definition of a medical or surgical device designed solely for the relief of a severe impairment or severe injury are distinct to the Kinsey System. We find that the Kinsey System is not a wig. We find also that the Kinsey System is not designed solely for the relief of a severe impairment or severe injury.

Our decision is that the supply of the Appellant known as the Kinsey System does not qualify for zero-rating under Schedule 8 Group 12 to VATA94 and that the Kinsey System is standard-rated for VAT purposes.

This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.