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Some errors in this article I'm afraid
I'm afraid there are a number of serious mistakes in this article - as someone who specialises in these issues (and many years ago wrote a large part of HMRC's E24 booklet) I see a lot of incorrect information out there. Apologies to the author but this is a very misleading article.
If a service charge is genuinely discretionary and advertised to the consumer as such (or optional, voluntary or suggested), and it is separate to the cost of supply - i.e. shown as a separate line item on the bill, - it is outside of the scope of VAT and should not be included as part of a business's turnover for VAT. The service charge is not subject to VAT. This is regardless of what the business subsequently chooses to do with the proceeds.
Secondly, it isn't down to staff to decide if a tronc system is set up or not. Proceeds of service charges and gratuities paid as part of a non-cash transaction are the legal property of the business (confirmed by both UK domestic courts and the European Court of Human Rights) and it the employer's prerogative whether to have a tronc or not and, if so, what proportion of the funds paid by customers will form the tronc.
Employers are not automatically required to register a tronc with HMRC or notify them of its existence. This obligation only exists if a business passes tronc funds to the troncmaster (either in cash or by transfer to a separate bank account under the troncmaster's control) and they are responsible for making payment to the employee. If a business makes payments to employees from its own funds under instruction from the troncmaster then the employer will be responsible for the deduction of PAYE via its own payroll and reported to HMRC via RTI as a part of their existing submission. Provided the conditions for exemption are satisfied this would be an NIC-free payment to the employee; the NI status is not compromised merely by the physical payment and operation of PAYE being dealt with via the employer.
There are indeed two conditions as set out. But they are "either/or" conditions; an employer needs only to satisfy one of them to meet the exemption from NI. So it is wrong to say that "the slightest involvement from the employer" will expose the payments to NI. The employer must not control the tronc or enter into contractual arrangements covering any payments from the tronc. Just because a tip is paid to an employer as part of a card payment does not automatically make it subject to NI.
It's no wonder that there is so much confusion ad uncertainty among the business community on these issues.
Peter Davies