Tips / Troncs

Tips / Troncs

Didn't find your answer?

Is anything I have said below technically wrong?

Also, what is the "norm" for restaurants?  I have no experience of restaurant clients.

  • Tips are always subject to income tax, how that tax is collected depends on whether or not the employer collects the tips or whether they are remitted to the staff member without involvement of the employer.  In the former, the tips will be processed through the payroll by the employer whereas in the latter the employee will need to inform HMRC themselves about the tips so that the correct tax can be paid.
  •  If mandatory service charges collected by the employer and distributed by them to the staff these are taxable and NIC able.
  • Tips are outside the scope of vat when genuinely freely given, care needs to be taken when tips are added directly onto the bill as this forms part of the dining service and this is vatable.
  • Tips are exempt from National Insurance Contributions provided they are neither paid to nor allocated to the employee by the employer.  Therefore if the employer collects the tips, decides how they are to be allocated and then makes payment of the tips, these amounts will be subject to NIC.
  • National Minimum Wage:  As you know the right to be paid the national minimum wage (NMW) is a statutory right.  Amounts paid by the employer to the worker which represents tips, gratuities or service charges do not count towards national minimum wage pay.

Replies (1)

Please login or register to join the discussion.

steve_knowles.png.jpg
By Steve Knowles
07th Oct 2011 16:36

tronc master

If paid direct to the staff by customers, then it is the responsibility of the individual employees to declare them; if the employer has any say in who gets what, the tips must be included in the normal payroll. However it is possible to have a troncmaster (an employee?) who is responsible for distributing tips without any input from the employer, and in that case there is a completely separate PAYE scheme for the tips- this generally means basic rate tax, but no NI (below the weekly limit). Most employees do not want such a responsibility!

Your post is basically correct

Thanks (1)