A farmer who turned his land over to growing and processing linseed has lost the first round of a fight to remove VAT tax from his farm-pressed oil

Customs and Excise slapped the 17.5 per cent tax on his linseed oil because they say it does not classify as a food.

An independent tribunal ruling has backed up their decision but Durwin Banks, of Mentham Home Farm, Horsham, is determined to overturn it.

Mr Banks said: "It seems totally illogical that a natural food which meets all the Government's current thinking on healthy diets should be penalised by the taxman when highly processed products, which have virtually no nutritional content, remain VAT free."

Linseed contains the highest concentration of any food of the essential fatty acid Omega-3.

Known as the "happy fat" because of its health benefits, it is one of the body's building blocks.

Linseed has been used in trials involving cancer patients as well as others with high blood pressure and circulatory problems, depression, inflammation and poor bowel function.

Mr Banks claims the oil can even boost people's sex drive because of its beneficial effect on blood flow and took a stand to last November's Erotica show at London's Olympia exhibition centre.

He used to sell a pack of 120 oil capsules for £10 but that has now gone up to £11.75.

Mr Banks is worried that his customers, many of whom are elderly or in poor health, will not be able to afford the price rises.

Customs and Excise say the VAT has been imposed because the Government draws a distinction between food and food supplements.

A spokesman for the department said: "It is a general legal principle that the word 'food' is interpreted according to its 'normal and everyday' meaning.

"The average person would not consider linseed oil to be 'food', so customs take the view that linseed oil is a supplement taken to make good a diet deficiency.

"Additionally, it is customs view that linseed oil is unpalatable, which is another indicator the item is not food."

Mr Banks objects to the decision because he says a type of linseed developed for food processing is considered edible and is therefore tax-free.

Mr Banks spent £80,000 in 2003 turning Muntham Home from a beef and arable farm into the first UK farm to grow, crush and sell its own linseed.

The Department for Environment, Food and Rural Affairs contributed a £26,000 grant as part of their programme encouraging farmers to diversify.

Trading as High Barn Oils, Mr Banks produces liquid oil for salad dressings, baking and smoothies as well as his oil capsules.

He also sells a cruder form of the cold-pressed bottled oil for animal consumption.

Despite the Independent VAT and Duties Tribunal decision against him last November, Mr Banks is still campaigning to have the tax removed and is urging his customers to write to their MP.