Weight Watchers (UK) Ltd v HM Revenue and Customs
| Jurisdiction | UK Non-devolved |
| Judgment Date | 02 February 2010 |
| Neutral Citation | [2010] UKFTT 54 (TC) |
| Date | 02 February 2010 |
| Court | First Tier Tribunal (Tax Chamber) |
[2010] UKFTT 54 (TC)
Judge David Williams, Upper Tribunal Judge (Chairman), Judge Malachy Cornwell-Kelly, deputy judge, First-tier Tribunal
National insurance contributions - liability to primary and secondary Class 1 National Insurance contributions - whether leaders taking Weight Watchers classes are employed earners, and Weight Watchers UK Ltd their employer
Leaders taking Weight Watchers classes were employed earners for the purposes of National Insurance contributions (NICs).
The taxpayer company ran a major business providing help to those who wished to lose weight. It did so in several ways under the brand name Weight Watchers ("the taxpayer"). As part of that, the taxpayer provided the umbrella organisation for a large series of the taxpayer weekly meetings throughout Britain. The weekly taxpayer meetings were hosted by individuals known as leaders.
It was an essential part of the taxpayer's organisation of meetings that each meeting had a leader and that he or she was the link between the taxpayer and the members at that meeting. The taxpayer provided leaders with detailed plans for all meetings, including a weekly topic or topics, and weekly leaflets for provision to all members.
The taxpayer had a central national organisation supplemented by regional and area staff. The main team of staff consisted of regional service managers with area service managers below them who had direct links with local leaders.
A leader undertook two essential sets of activities: those resulting from her responsibility for setting up and running meetings on a weekly basis; and those resulting from her presentation for sale, and sale, of the taxpayer's products to members.
The conditions governing the relationship between the taxpayer and the leaders provided for the leader to receive in consideration for his/her services in taking a meeting the commission calculated in accordance with the scale of fees then in force. Leaders received payment from the taxpayer for all sales of products at a set rate.
HMRC made determinations under reg. 80 of the Income Tax (Pay As You Earn) Regulations 2003 (SI 2003/2682) for the years 2001-02 to 2006-07 on the basis that the taxpayer was the employer of the leaders. The taxpayer appealed against all the determinations.
HMRC also made decisions under Social Security Contributions (Transfer of Functions, etc) Act 1999 section 8s. 8 of the Social Security Contributions (Transfer of Functions) Act 1999 requiring named individuals and the taxpayer to account for Class 1 NICs for those individuals for the same tax years as the reg. 80 decisions.
Whether the leaders were self-employed or employees.
The First-tier Tribunal (Tribunal Judges David Williams and Malachy Cornwell-Kelly) dismissed the appeals in principle.
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.
The tribunal's finding about personal service reflected its findings of fact and interpretation of the relevant conditions relating to the contended right of a leader to find a replacement leader if she did not take a particular meeting. The taxpayer paid only the leader who took the meeting. The leader who did not take a meeting had no contractual rights as against the taxpayer in respect of that meeting. The leader who did take the meeting had those rights. It followed that there had to be a contract in place even for an individual meeting conducted by a leader as a replacement leader. That suggested that the relationship was one that might be best approached as that of specific contracts for acting as a leader for a particular meeting or meetings to be read in the context of agreed general terms and conditions.
Those terms and conditions, and the contracts between the taxpayer and leaders that incorporated them, were not limited only to the terms in the agreement and conditions. They included also certain parts of the two key handbooks for trainees and for leaders. That was the clear understanding of both the taxpayer and of leaders 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, but putting particular weight on the point that a leader had to provide her personal service in running a meeting to gain any contractual advantage from the taxpayer, on the requirement that she delivered the taxpayer's programme and only the taxpayer's programme at a meeting, and on the control that the taxpayer had over the existence of any meeting and who might be a member of that meeting, the tribunal found that on balance the terms and conditions of the contractual relationship between the taxpayer and its leaders were characteristic of contracts of service.
1. The Appellant Company ("WWUK") runs a major business providing help to those who wish to lose weight. It does so in several ways under the brand name Weight Watchers ("WW"). As part of this, WWUK provides the umbrella organisation for a large series of WW weekly meetings throughout Britain. The weekly WW meetings are hosted by individuals known as Leaders. WWUK is a wholly-owned subsidiary company of Weight Watchers International Inc. The parent company is also parent to companies running similar businesses elsewhere in the world, and to an internet business. Save for the fact that the international company has control of WWUK, the tribunal saw no relevance either in the internet business or the foreign businesses to these appeals.
2. The tribunal adopts the following terminology and abbreviations in this decision:
ASM |
Area service manager. The country is divided by WW into a number of regions, and each region into a number of areas, for the purposes of managing the WW business. An ASM is the employee charged with managing the business in her area. She answers to her RSM. |
Helper |
An individual who assists at a weekly WW meeting, for example by weighing and recording members' weights or taking or checking or recording their membership payments. |
Leader |
An individual who has primary responsibility for running a WW meeting. Her relationship with WW is the main issue in these appeals. Leaders were previously known as lecturers. A Leader may be responsible for a single weekly meeting or up to 12 weekly meetings. The average is between three and four. |
Main Appellant |
WW. The phrase is used to distinguish between WW as an appellant and the Leaders who are also appellants. |
Meeting |
The weekly sessions held for members and run by Leaders. These normally last for an hour and consist of a combination of the following: payment for attendance or production of a card showing prepayment by each member; confidential weighing and recording the weight of each member; a session led by the Leader for presentation or discussion of information or other matters relevant to weight loss by those at the meeting; sales and purchases of WW food and other products. Although "meeting" is the term used in this decision, the term "class" is used interchangeably with "meeting" in the contractual documents. |
Member |
Paying attendees at a WW meeting or others entitled to attend the meeting. Members may pay to attend either weekly or by a monthly pass. "Gold members" are members who have achieved their target weight (the weight each member sets herself as a target while attending the meetings) and are entitled to continue attending without continuing payment. |
RSM |
Regional service manager - see ASM. |
WWUK |
Weight Watchers (UK) Ltd, the Main Appellant. It is a private company limited by shares and registered in England and Wales. It is wholly owned by Weight Watchers International Inc. |
This use of language is standardised within WW. For example, Leaders used to be called lecturers, helpers used to be called weighers and checkers, and meetings used to be called classes. Decisions were taken to change these names to those set out above in or about 2003, and the new terminology replaced the former terminology in most contexts. The tribunal uses the current terminology unless there is reason to note the use of the former terminology. The tribunal does not regard the change in terminology as signifying any specific underlying change, and regards the old and new terms as interchangeable.
3. The tribunal refers to individuals who are Leaders or in any of the other categories above as "she". This reflects the evidence. For the purposes of this decision the feminine where used includes the masculine where appropriate.
4. The central question in these appeals is whether those Leaders are employees of WWUK or are self-employed.
5. The question is of considerable practical importance. At any one time there are more than 1,000 Leaders holding weekly WW meetings in Britain, between them conducting several thousand meetings each week. Those meetings involve many thousands of individual members in any week.
6. It is convenient to summarise the general factual position before dealing with the evidence in detail. WWUK is part of a long-established major international corporate business providing weight reduction and weight maintenance help to its customers, whom it calls members. This help is currently provided through two primary routes: through local meetings and by the internet. WWUK is involved in running meetings locally throughout Britain. In any one week there may be over 6,000 separate meetings taking place. The meetings...
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Weight Watchers (UK) Ltd v R & C Commissioners
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