FAQs on employment status following Weightwatchers

February 08, 2012 2012

We have had a number of calls and emails in recent weeks asking what impact the recent Weightwatchers case (which you will recall was a victory for HMRC to the tune of around £23m) will have or is having in how HMRC approach situations where workers are being paid as self employed.

faq

We seem to be repeating ourselves quite often at the moment when responding to queries so we thought it would be a good idea to flag up some typical concerns/questions around employment status on the website for all to see, together with our informed response and comments.

Q1. Does the victory against Weightwatchers mean that HMRC will win every status case now ?

A: Definitely not !  Although this case has provided yet more important precedent for HMRC to use as ammunition in the courts in future cases, there will be many situations where the Weightwatchers judgement is not relevant or helpful and so  each case will still be judged on its own merits. That said though, those organisations that are run in a similar way to Weightwatchers should be fearing the worst just now !

Q2. Are advisors just scaremongering about the Weightwatchers case or should engagers of self employed workers REALLY be concerned ?

A: Aside from collecting a huge sum of money, the Weightwatchers victory is significant for HMRC as it demonstrates (yet again) that they WILL pursue cases where the self employed argument is weak no matter how long it takes or who the taxpayer is. We have said many times before, employment status is THE biggest risk area for PAYE compliance and so ALL businesses paying workers on a self employed basis should take note of this recent case and not be blind to the potentially significant risk that their business is exposed to in paying workers in this way.

Q3. Will HMRC come after every business paying workers gross now that they have won the Weightwatchers case ?

A: No. For a start, it is not physically possible for HMRC to identify and pursue every business with self employed workers as they just do not have the resources to do so. But, more importantly, employment status has been a huge issue for as long as we can remember (which is a long time !!) and, in all honesty, the Weightwatchers case does not change anything at all. For many years, HMRC has had specialist teams targeting what they call "false self employments" and it has always been a major part of their tax compliance and collection strategy. Things will be no different going forward. Those businesses with regular self employed workers will be on HMRC's radar the same as they always have been.

Q4. Is HMRC only interested in large companies like Weightwatchers in tackling employment status ?

A: Absolutely not. For every large case that hits the headlines there are a dozen small businesses being challenged both in and out of the courts that do not come to most people's attention. HMRC's continued focus on IR35 is a very strong message that no business is too small for them to target. It's rich pickings for them whenever they get a result.

Q5. What was the main technical sticking point(s) in the Weightwatchers case to be aware of ?

A: The main crux of the case was that the level of control by Weightwatchers over how the work was done, and by whom, and the obligations on both sides to provide work and do the work were so great that the relationship was, to all intents and purposes one of employer and employee. Importantly, the "self employed" contracts in existence bore no resemblance to what actually happened in reality so the contracts were not useful evidence in this case. The key message we would stress again, therefore, is NOT to over rely on contractual terms. It is the actual working practices that are more important in tax law.

Q6. What next ?

A: It's business as usual as far as we are concerned. HMRC still focusing very much on identifying self employed workers who may be employees, lots of cases going through the courts and Optimum PAYE working with many clients in either proactively addressing the issue or in "firefighting" if HMRC have already mounted a challenge.

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