If one operates a tronc system for distributing credit card tips (cash tips taken directly by staff, so do not enter business's accounts), do the tips go in as income, with a corresponding debit for salary costs, or do they stay out of the business's account entirely? Any help would be much appreciated!
Does it matter that the tronc goes through the business's PAYE scheme, not a separate one (as is allowed by HMRC).
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Hi Corp0803. The income shouldn't be included in the accounts at all as, for your Tronc to be valid, the tips should always be the property of the staff.
If the items are ending up in the company's bank account (as presumably the credit card here belongs to the company), the tips element should go to a Tronc suspense account as should the payment of the tips to the staff.
A separate PAYE is required for this purpose.
I'm not sure how the company receiving the tips affacts the validity of the Tronc system. I would advise you to read through HMRC's form E24 which gives several scenarios of whether or not they will accept the arrangement as a genuine Tronc.
You are in a little minefield here. If the tips are going through the company's CC machine then they cannot go through the tronc they are paid to and by the company to the employee and subject to tax and NI'ee ... but may or maybe not subject to NI'er ...
We’ve always credited Tronc receipts to a Tronc control account, payroll journals then debit this account.
You should advise that a separate Tronc PAYE scheme is set up with a Troncmaster who isn’t a director/owner (it’s normally the GM or finance person). There’s a PAYE/NIC issue if it’s run through the normal payroll. I think it isn’t NIable if a separate scheme not controlled by a director/owner.
Technically the Troncmaster is personally liable for any PAYE debt.