Weight Watchers (UK) Ltd v R & C Commissioners
| Jurisdiction | UK Non-devolved |
| Judgment Date | 14 October 2011 |
| Date | 14 October 2011 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
Upper Tribunal (Tax and Chancery Chamber).
Briggs J.
Jonathan Peacock QC and Stuart Ritchie (instructed by Hogan Lovells LLP) for the appellants.
Adam Tolley (instructed by the Solicitor to HM Revenue and Customs) for the respondents.
The following cases were referred to in the judgment:
Autoclenz Ltd v Belcher UNK[2011] IRLR 820
Brent London Borough Council v Fuller ICR[2011] ICR 806
Cable & Wireless plc v Muscat UNK[2006] IRLR 354
Carmichael v National Power plc ICR[1999] ICR 1226
Clark v Oxfordshire Health Authority UNK[1998] IRLR 125
Consistent Group Ltd v Kalwak UNK[2007] IRLR 560
Cotswold Developments Construction Ltd v Williams UNK[2006] IRLR 181
Edwards v Bairstow ELRTAX[1956] AC 14; 36 TC 207
Express & Echo Publications Ltd v Tanton ICRUNK[1999] ICR 693; [1999] IRLR 367
Grant v HM Land Registry UNK[2011] IRLR 748
James v Greenwich London Borough Council ICR[2008] ICR 545
MacFarlane v Glasgow City Council UNK[2001] IRLR 7
Meek v City of Birmingham District Council UNK[1987] IRLR 250
Narich Pty Ltd v Commissioner of Pay-roll Tax ICR[1984] ICR 286
O'Kelly v Trusthouse Forte plc ICR[1983] ICR 728
Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance ELRTAX[1968] 2 QB 497; [2010] BTC 49
Simmons v Heath Laundry Co ELR[1910] 1 KB 543
Stephenson v Delphi Diesel Systems Ltd ICR[2003] ICR 471
Income tax - PAYE - National Insurance contributions - Employment status of leaders conducting Weight Watchers meetings - Contractual relationship - Criteria of substitution, control and mutual of obligation - Whether relationship between company and leaders of meetings characteristic of contract of service - Income Tax (Pay as You Earn) Regulations 2003, reg. 80 - Social Security Contributions (Transfer of Functions, etc.) Act 1999, Social Security Contributions (Transfer of Functions, etc) Act 1999 section 8s. 8.
This was an appeal from a decision of the First-tier Tribunal ([2010] UKFTT 54 (TC); [2010] TC 00367) that the taxpayer company, which ran a well known weight loss programme, was liable for PAYE tax and employer's National Insurance contributions in respect of the activities of the "leaders" who arranged and conducted meetings of those participating in the programme.
The company was a wholly-owned subsidiary of a US corporation which carried on the Weight Watchers programme both there and, through subsidiaries and franchisees, in many countries throughout the world. Although the programme was also delivered via the internet, the appeal was only concerned with the circumstances of its delivery by leaders at meetings within the UK.
Leaders were recruited by the company from among its successful members. They were trained in the presentation of the programme pursuant to a standard form written agreement (the MOA). The leader was required to abide by conditions which were expressed to govern the relationship between the company and any leader engaged to conduct Weight Watchers meetings.
The conditions provided for the leader to be paid a commission for conducting meetings and for the leader to fix the time, date and place of any Weight Watchers meetings he or she agreed to take. By clause 10, if the leader did not propose to take any particular meetings on any particular occasion and was unable to find a suitably qualified replacement, Weight Watchers would if so requested by the leader, attempt to find such replacement and for that purpose the leader would give the company's area service manager as much prior notice as possible. The company also issued policy booklets to the leaders.
Departing from many years' prior practice to the contrary, in connection with the tax affairs of the company and its leaders, HMRC had made determinations under reg. 80 of the Income Tax (Pay as You Earn) Regulations 2003 and s. 8 of the Social Security Contributions (Transfer of Functions, etc.) Act 1999 on the basis that the remuneration paid by the company to the leaders arose from the leaders' work as employees. Previously, they had been treated as self-employed or independent contractors. The company and a number of leaders appealed to the FTT challenging the view that they were employees. The company also contended on its appeal to the FTT that the reg. 80 determinations in the period from April 2001 until April 2003 were invalid because they were out of time.
The FTT concluded that the terms of the contractual relationship between the company and the leaders were for the most part set out in the MOA, the conditions and the booklets. Although there was a continuous contractual relationship between the company and each leader under an over-arching or umbrella contract, each meeting or series of meetings was conducted pursuant to a specific contract which incorporated, to the extent applicable, the terms of the umbrella contract. The FTT found that there was sufficient mutuality of obligation between the company and each leader in the meeting-specific contracts to satisfy the first of the conditions in Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497; [2010] BTC 49. In relation to clause 10 of the conditions the FTT concluded that where a leader found a substitute to take a particular meeting, the contract for that meeting was between the substitute and the company, and that it entirely replaced any contract between the original leader and the company in relation to that meeting. It did not therefore permit the leader to discharge his or her contractual obligations in relation to any meeting by the provision of another person's services. Notwithstanding the discretion apparently conferred on leaders both in relation to fixing meetings and in the conduct of meetings, the combined effect of the conditions taken as a whole and the mandatory provisions of the policy booklets was that the company had sufficient control over the leader's performance of his or her obligations to satisfy the second of the Ready Mixed Concrete contract conditions. Taking all the factors together, the third condition was also satisfied. Given that a leader had to provide personal service and the degree of control exercised by the company, the contract was a contract of service.
On appeal, the company and the leaders submitted that the FTT had erred in its analysis of the contractual relationship and in its analysis of the issues of mutuality of obligation, control and the third Ready Mixed condition.
Held, dismissing the appeal:
1.The reg. 80 determinations were subject to the six-year time-limit for the making of an assessment in s. 34 of the Taxes Management Act 1970. That was the effect of reg. 80(5)(a). There was no need or basis in addition to treat the employer's PAYE return as if it were a taxpayer's self-assessment return under s. 8 or 8A of the TMA, so as to make the s. 29(3) to (5) conditions apply. That would have the effect of imposing conditions for a reg. 80 determination of a type which were not designed for that purpose, in addition to the general six-year time-limit which clearly was to be applied from s. 34.
2.The FTT was correct to conclude that there were meeting-specific contracts between the taxpayer and its leaders. The umbrella agreement constituted by the taxpayer's conditions, the MOA and policy booklets required a further and distinct contract-making process for the conduct of any particular meeting. The FTT had not disabled itself from applying the Ready Mixed Concrete tests to the contracts thus identified by any lack of specificity as to their detailed terms.
3.Contrary to the taxpayer's argument, a leader's right to propose not to take a particular meeting was not unfettered. It was fettered as a matter of implication by the need to show some good reason for proposing not to take a meeting, albeit a reason which might fall short of inability. It was further fettered by obligations to seek to find a suitably qualified replacement, to notify the areas sales manager if unable to do so, so as to seek the taxpayer's assistance, and to conduct all subsequent meetings in the series which had been agreed. Accordingly, there had been no error of law in the FTT's analysis of the question whether the meeting-specific agreements between the taxpayer and its leaders satisfied the mutuality of obligation condition.
4.The interpretation of contracts of this type was to be conducted in a purposive manner which paid due regard to the practical realities of the relationship. The FTT's analysis of the control issue was adequately detailed for the purposes of explaining its decision. The question whether any particular contractual relationship satisfied the control condition in Ready Mixed Concrete was a question of fact and degree. The FTT's conclusion on the control issue involved no error of law.
5.The FTT did in fact carry out an overall review of the relationship, and was entitled to conclude that on balance the leaders were employees rather than independent contractors.
1.This is an appeal from the Decision of the First-tier Tribunal (Tax Chamber) (Judge David Williams and Judge Malachy Cornwell-Kelly) issued on 2 February 2010 ([2010] UKFTT 54 (TC); [2010] TC 00367), whereby the FTT dismissed appeals against determinations by HMRC under reg. 80 of the Income Tax (Pay As You Earn) Regulations 2003 and Social Security Contributions (Transfer of Functions, etc) Act 1999 section 8s. 8 of the Social Security Contributions (Transfer of Functions, etc.) Act 1999, relating respectively to the income tax ("PAYE") and employer's National Insurance contributions ("NICs") alleged to be payable by Weight Watchers (UK) Limited ("WWUK") in respect of the activities of persons engaged (to use a neutral term) primarily to arrange and conduct meetings of consumers of WWUK's well-known programme for the assistance of those wishing to lose weight ("the Weight Watchers...
To continue reading
Request your trial
-
Spring Salmon & Seafood Ltd
...34 section 36ss34 and 36 TMA were engaged and not Taxes Management Act 1970 section 29s29 (Weight Watchers (UK) Ltd v R & C CommrsTAX[2011] BTC 1895). While the burden of proof is on HMRC it may be discharged by pointing to unexplained discrepancies (Hurley v Taylor (HMIT)TAX[1998] BTC 32).......