Federal Tax Service vs. Fitness Club. Who Won 1 Million Rubles in Court and What Do Self-Employed Trainers Have to Do with It?
Aigul Shadrina
Expert. Founder of the accounting company S4 Consulting and tax consultant.
Can a club hire self-employed trainers? It would seem, why not: they don’t work according to a schedule, they receive payments once a month, they sign contracts and acts – what could go wrong? I am reviewing a case in which a fitness club paid 1 million rubles in insurance premiums after a desk audit.
What is the essence of the matter?
A small fitness club operated in one of the shopping malls in the Leningrad Region. And 23 instructors worked there: they consulted visitors and, upon request, conducted classes in the gym. A common story, except that they were not on the staff, but worked under a contract as self-employed.
In November 2021, the Federal Tax Service reviewed the report for the first half of 2021 and found no accruals or payments for insurance premiums for 23 trainers. As a result, the tax authority reclassified contracts with the self-employed as work under employment contracts and decided that the fitness club had illegally optimized payroll taxes in this way.
Arguments of the Federal Tax Service
The club signed standard contracts with all 23 coaches, from which it was not clear what services the contractors were providing.
The trainers provided their services on the club premises and used the club's equipment as if they were employees.
Transfers to the self-employed were made regularly, which can be considered a salary payment.
According to the Federal Tax Service, the club understated its tax base by more than 4.6 million rubles.
After a desk audit, the fitness club was assessed an additional 1,069,350.28 rubles.
Insurance premiums: 892,919.47 rubles.
Penalty: 176,430.81 rubles.
The club's management decided to challenge the tax authorities' decision and filed a lawsuit.
Fitness Center's Argumentation
The club's management insisted that it worked with the self-employed on a legal basis:
All coaches were registered and paid the professional tax.
A civil law contract was concluded with each of them, which said nothing about compliance with a certain work schedule, and did not provide for sick leave or other social guarantees.
The coaches provided consulting services to the club's visitors, did not participate in the production process and were not subject to work regulations like ordinary employees.
Each month, based on the results of the services provided, the trainers provided a signed acceptance certificate for the work performed and received a reward.
Arguments of the courts
The court of first instance sided with the Federal Tax Service and upheld the tax authority’s decision.
The first court decided – guilty
According to him opinion Under the guise of contracts with self-employed coaches, ordinary labor relations were hidden:
The coaches provided services that were directly related to the club's statutory activities.
Services were provided systematically during the club’s operation, the process was continuous, there were no one-off tasks.
Invited trainers conducted classes in the club's premises, using materials and equipment that were there.
Payments were made regularly, as per employment contracts.
In some acts, the duration of training is overstated.
It is not clear from the certificates of work performed what services were provided and in what quantity.
The second court decided: no evidence, therefore innocent
The taxpayer did not agree and went further. The Thirteenth Arbitration Court of Appeal supported him and issued a judgment on August 17, 2023 resolutionin which he overturned the Federal Tax Service’s decision to pay 1 million rubles and ordered the club to return 4,500 rubles in state fees.
The court's arguments:
The Federal Tax Service did not prove that the coaches were included in the club’s work schedule as active employees.
The club's staffing schedule did not include a fitness trainer position and there were no employees who provided the same services as self-employed trainers.
Payments of remuneration were made based on the provision of services no more than once a month, and not every two weeks, as with standard salary payments.
It is not prohibited to hire individuals to provide services similar to the duties of full-time employees. Such similarity cannot be a sufficient basis for reclassifying civil-law contracts as employment contracts.
The third trial is guilty, because the second trial was “the devil’s work”
But the taxpayer's luck ended there – the Federal Tax Service filed an appeal. The cassation court reviewed the case and supported the tax authorities, the decision of the appellate court cancelled.
The judge agreed with the arguments of the court of first instance and added a little of his own:
The trainers did not risk anything in their work, they came to the club with everything ready, which provided them with clients, equipment and training halls – real self-employed people act at their own risk, like ordinary entrepreneurs.
The number of trainers was greater than the number of staff members.
For both parties, the main thing was the training process, not the final result. Contradicts the meaning of the civil-law contract – to obtain a result.
The coaches registered their self-employment shortly before starting work with the club.
The club concluded standard contracts with everyone, which did not contain conditions on fixed prices and terms for the provision of services, however, services were provided during the club’s working hours according to the schedule.
The taxpayer did not give up and tried to reach the Supreme Court, but received refusal in the consideration of the complaint. This was the final point in this litigation: the self-employed coaches were actually employees of the club, so the Federal Tax Service assessed an additional 1 million rubles. And there can be no other solution.
To sum up the case, I would like to note that the courts found a total of 13 signs that make it impossible to work with self-employed trainers:
All contracts were standard and did not contain conditions regarding a fixed price or term for the provision of services.
The coaches provided their services according to the club's schedule.
The 23 individuals hired under civil-law contracts systematically provided fitness trainer services for a long time, conducting group and personal training with clients.
All coaches registered as self-employed shortly before signing contracts with the club.
Fitness trainer services are related to the club's activity, and to perform this activity, a corresponding staff of workers is needed. OKVED 93.13 “Activities of fitness centers” obliges.
There were more hired trainers than full-time employees.
Clients paid for the coaches' services at the club's cash desk, and the club then made payments to the self-employed coaches.
The club provided the premises and equipment for the classes.
Trainers worked with clients according to the club's schedule.
The self-employed did not have expenses for purchasing inventory, renting premises and equipment, paying for electricity, etc.
For the club, the training process itself was more important than the results of it, which contradicts the meaning of civil-law contracts.
The coaches constantly performed the same type of work, under the same conditions, which took place under the control of the club.
There was no information that self-employed individuals provided similar services to anyone or anywhere else except this club.
In fact, any company can work with the self-employed legally without substituting labor relations, if the actual business processes correspond to the legal registration. And a fitness club in particular can also work with the self-employed. If you are interested, then in the next series I will analyze a case where a fitness club defended its work with the self-employed and fought off the tax authorities.
And by the way, such risky work schemes in reality, as in this article, are quite common. Including in IT companies. From my experience and the experience of my team, in about 50% of cases self-employed cannot be used due to the specifics of business processes. But some entrepreneurs ignore recommendations and judicial practice and still start working with them.
How do you like the material? Should I continue this column? There are a lot of tax cases and there are interesting ones. If it comes in, I will share
