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Staff tips in a restaurant

I have been asked to quote for preparing the accounts of a limited company which trades as a restaurant.

I am told at the moment that they do not accept tips by credit card and that the staff have all signed letters to say that they will deal with their own tax on tips. However when I asked if the kitchen staff received any tips I was told that they did - everything is pooled and divided out in a manner agreed by the staff. The management take no part in this arrangement.

I am comfortable that no NI is due on the tips because there is no involvement of the company but my feeling is that there should probably be a tronc master since the staff pool the money before distributing it and it's not just a matter of each member of staff dealing with their own tips.

Does anyone have any thoughts or practical suggestions? 


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Is there no-one with a restaurant or hotel client or do I do what the previous accountants did and include a paragraph in the letter of engagement which states that they will not offer any advice nor will they consider the position regarding tips and that they take no responsibility for it being operated correctly?

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HMRC website

Check HMRCs website there's plenty of advice on there about troncs.

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Done that

I have checked the HMRC website just to make sure that my understanding was correct and in doing so I haven't changed my views on how it should be dealt with.

The owners say that their existing accountant knows what happens with the tips and has confirmed that it is Ok (despite the letter of engagement). I just wanted to see how others dealt with what is a hot area for HMRC at present.

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PAYE scheme

There should be a PAYE scheme with a troncmaster.

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The management take no part in this arrangement.

It's normal for FOH and Kitchen staff to have very different views on how tips should be shared - so management often have to intervene.

So I'd take this with a pinch of salt (sorry!)

The arrangement as it stands is not compliant.  A troncmaster should be deducting and remitting tax. If the management acquiesce in non-compliance they could be liable.

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Pretty cool allocation mate. Whatever you have shared here about staff tips in a restaurant seems to me pretty outstanding from all side. Thanks dude for this kind of allocation here.
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