Weight Watchers risks losing pounds in unpaid tax to the HMRC who are tackling businesses over the true employment status of the 'self employed', having determined that group leaders were employees and not self-employed.
In Weight Watchers (UK) Ltd v HMRC the written contractual arrangements with Group Leaders, purporting to be a contract for services, were actually a contract of employment. This meant that all of the company's Group Leaders were actually employees and not self employed, with their tax status changing accordingly.
The tribunal found there was a contract of employment and not services by weighing up all of the evidence relating to the Leaders' engagement.
Evidence supporting the notion that they were self employed included:
- the contract for services between the Leaders and Weight Watchers, giving the Leaders 'absolute discretion' in the conduct of their classes
- requiring them to organise their own taxation and National Insurance.
However, tipping the scales in favour of the HMRC's contention that the Leaders were employees were the following factors:
- two handbooks that set out how the Leaders had to conduct the meetings, controlling the Leaders performance and contradicting the contract for services
- evidence that Leaders hired meeting venues in Weight Watchers' name, not their own
- the Leader's had to personally provide a service to Weight Watchers if they were to be paid. If a substitute Leader was arranged the original Leader would not be paid.
Best Practice
The issue of employment status is a complex one. This decision is a useful reminder that when considering the issue of status, it is important to identify and analyse all the elements of the contract between the relevant parties and the name given by the parties is not determinative.
This case is particularly interesting because it illustrates that a right of substitution, even if exercised, does not necessarily lead to a conclusion that the person is self-employed. If the substitute must be approved by the client and is engaged and paid by the client, this may be consistent with an employment relationship.
Therefore when engaging someone on a self-employed basis, it is important to be mindful of the risks of employment status, and ensure that contractual paperwork is as robust as possible.
If you require any further advice on the employment status of your workforce, please contact Alison Graham on 0117 314 5304.
This publication is for guidance only. Reliance should not be placed upon it and nor should action be taken, without obtaining advice in respect of the specific circumstances applicable. We will be pleased to provide such advice or assistance.
