Leaders taking weight watchers classes were employees of Weight Watchers UK Ltd

The taxpayer company ran a major UK wide business providing help to those who wanted to lose weight. This was done in several ways under the brand name Weight Watchers (‘the taxpayer’).

As part of its offering, the taxpayer provided the umbrella organisation for a large series of weekly meetings which were hosted by individuals known as leaders. At the meeting each leader was the link between the taxpayer and the members attending. In advance of the meeting, the taxpayer provided leaders with detailed plans, including a weekly theme/topics as well as leaflets for distribution to all members.

Leaders undertook two sets of activities comprising setting up and running meetings on a weekly basis and presentation for sale, and the sale, of the taxpayer's branded products to members. In consideration for his/her services in taking a meeting the leader received commission calculated in accordance with the scale of fees then in force. Payment at a set rate was also received from the taxpayer for sales of products.

HMRC had made determinations under reg. 80 of the Income Tax (Pay As You Earn) Regulations 2003 for the years 2001/02 to 2006/07 on the basis that the taxpayer was the employer of the leaders. HMRC also made decisions under s. 8 of the Social Security Contributions (Transfer of Functions) Act 1999 requiring the taxpayer to account for Class 1 National Insurance Contributions (NICs) for the same tax years as the reg. 80 decisions. The taxpayer appealed against all the determinations.

The First Tier Tribunal dismissed the appeals in principle stating that a contractual relationship existed between the taxpayer and a leader in two contexts: where the leader personally took a meeting and separately in relation to the taxpayer's products held by the leader for sale or return. There were contracts between the taxpayer and each leader about both those matters.

If a replacement leader was used, the taxpayer paid only the replacement who took the meeting. Furthermore the leader who had not taken the meeting had no contractual rights against the taxpayer in respect of that meeting. It was the leader who did take the meeting who had those rights. Therefore there had to be a contract in place even for an individual meeting conducted by a leader as a replacement. That suggested that specific contracts applied for acting as a leader for a particular meeting/meetings and that this should be read in the context of agreed general terms and conditions.

Those terms and conditions, and the contracts that incorporated them, were not limited only to the terms in the agreement and conditions and also included certain parts of the two key handbooks for trainees and leaders. That was the clear understanding of both parties as illustrated by the oral evidence given to the Tribunal.

In addition to mutuality and a relationship involving personal service by a leader, those terms and conditions imposed important controls on any leader when taking a meeting. Thus the taxpayer had a considerable degree of control over every leader to ensure that she delivered the taxpayer's programme.

Taking all those factors together, the Tribunal found that overall the terms and conditions of the contractual relationship between the taxpayer and its leaders were characteristic of contracts of service.

The full text of the judgment is available at http://www.bailii.org/uk/cases/UKFTT/TC/2010/TC00367.html