Back in 2007, HMRC ruled that WeightWatchers' group leaders in the UK should have been treated as employees for tax purposes, with tax and National Insurance deducted by the employer. Weightwatchers UK disagreed, claiming that they were self employed, and decided to appeal the ruling.

Appeals relating to HMRC matters are held by the UK first-tier tax tribunal, and their ruling in WeightWatchers (UK) Ltd vs HMRC found that the leaders were in fact employees, resulting in a tax bill for WeightWatchers (UK) of a reported £23million.

Factors taken into consideration by the tribunal – and which should be considered by all organisations wrestling with employed v self employed debates - included:

• Mutuality of obligation - it was deemed to exist (the employer has to offer the work and the employee had to do it), suggesting an employee/employer relationship
• Degree of control - Guidelines provided to the leaders were found to suggest that leaders were subject to tight control, and therefore contradicted the claim that they were self employed.
• The ‘personal service’ provided by the leaders - Although leaders could substitute themselves for an alternative leader, WeightWatchers (UK) had a high level of control over who that leader could be, and the substitute was paid directly by WeightWatchers (UK), not the original leader. It was therefore ruled that there was no genuine right of substitution.
• Sales of product - Sales of WeightWatchers goods did not constitute a contract between the leader and the purchaser, but WeightWatchers (UK) and the purchaser.

When taking decisions, HMRC will not only consider the written contractual agreement that is in place, but how the work is undertaken on a day to day basis. If you are unclear, it is best to seek advice before the tax man calls, so contact Campbell on 01494 451681 or Campbell@hradvantage.co.uk.