Is it possible to combine Tronc and Cover Charge?

Merging two discretionary charges on a restaurant bill in consideration of the upcoming legislation

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Hello,

Restaurants are gearing up to comply with the new legislation mandating the full distribution of service charges and tips. To maintain their current payout and reserve ratio, restaurants are exploring options. For instance, if a restaurant currently imposes a 12.5% service charge, distributing only 8% to staff while retaining the remainder. Is it a possibility for a restaurant to replace the wording "Discretionary service charge 12.5%" with "Discretionary service and cover charge 12.5%"? Keep it very clear with the employees about the breakdown of 12.5%, distribute only the service part and keep the cover charge.

Replies (16)

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By carnmores
23rd Jan 2024 13:59

no no no, the service charge is for the staff not the owners / operators. stop trying to get around that.

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Replying to carnmores:
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By carnmores
23rd Jan 2024 14:00

and ban cover charges

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By David Ex
23rd Jan 2024 14:01

Presumably you just need to make sure you understand how the law defines and treats particular payments as per the legislation and act accordingly. That’s the minimum and there may be other commercial and legal considerations.

https://www.legislation.gov.uk/ukpga/2023/13/enacted

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Danny Kent
By Viciuno
23rd Jan 2024 14:05

Hardly discretionary if it is imposed. American nonsense - at least their servers get paid next to nothing so it kind of makes sense.

Cut the cr*p and increase prices to cover the element that is "lost" as a cover charge. Don't add it onto the bill at the end.

Insist all tips are either cash, or handled separately via the troncmaster (or via the normal payroll).

Sounds more like a lawyer question although I'd wager that keeping any part of the "tip" is contrary to the new legislation and would be against the rules regardless what whatever you call it on the receipt.

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VAT
By Jason Croke
23rd Jan 2024 14:20

This is more a legal question rather than an Accounting one.

From a VAT perspective, optional service charges (which can be added to a bill but removed by customer request) are outside the scope of VAT.

https://www.gov.uk/hmrc-internal-manuals/vat-supply-and-consideration/va...

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Replying to Jason Croke:
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By FactChecker
23rd Jan 2024 16:17

Note HMRC's understandable perspective:
"it is the menu that sets the contract between the restaurant and the customer."
So to save the VAT the charges (however labelled) must truly be discretionary i.e. at the choice *solely* of the customer.

Anyway I doubt I'm in a tiny minority who, if faced with the choice of whether or not to pay 'extra', might well do so if assured that it all went to staff ... but would recoil at the concept of being conned by the business (which is what it feels like if charged more than the advertised price).

I've not studied the new legislation, but I'd be uncomfortable trying OP's proposal if the 'arrangement' wasn't completely open/transparent to all customers as well as all staff ... hence the relevance of my other comments.
If I found out that was what was meant by a 12.5% 'charge', I'd opt to not pay it - and then give it (in cash) instead to the serving staff.

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Replying to FactChecker:
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By David Ex
23rd Jan 2024 17:27

FactChecker wrote:

Note HMRC's understandable perspective:
"it is the menu that sets the contract between the restaurant and the customer."
So to save the VAT the charges (however labelled) must truly be discretionary i.e. at the choice *solely* of the customer.

Anyway I doubt I'm in a tiny minority who, if faced with the choice of whether or not to pay 'extra', might well do so if assured that it all went to staff ... but would recoil at the concept of being conned by the business (which is what it feels like if charged more than the advertised price).

I've not studied the new legislation, but I'd be uncomfortable trying OP's proposal if the 'arrangement' wasn't completely open/transparent to all customers as well as all staff ... hence the relevance of my other comments.
If I found out that was what was meant by a 12.5% 'charge', I'd opt to not pay it - and then give it (in cash) instead to the serving staff.

As annoying as booking fees for the privilege of paying for an event ticket.

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By paulwakefield1
23rd Jan 2024 18:24

The increasing problem is that fewer and fewer people carry cash these days.

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Replying to paulwakefield1:
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By spilly
23rd Jan 2024 22:33

Having worked in the hospitality business myself, a cash tip was always appreciated as it meant we got to keep it. Tips paid via card always seemed to ‘disappear’ somehow. I still always make sure I have enough cash when on a night out to tip the staff separately from the main bill.

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Replying to spilly:
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By paulwakefield1
24th Jan 2024 07:38

So do I but many don't and even I am caught out sometimes. A lot of places (around here anyway) will now not even allow you to add a tip on a card so it's cash or nothing - I feel that staff are really missing out.

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Replying to paulwakefield1:
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By Tax Dragon
24th Jan 2024 07:47

Maybe the new legislation will change that. Here's hoping, anyway.

As for the question... "gearing up"... in my head all that needs is put the menu prices up by 4.5%, have 8% as one of the standard 'tip' preselects, pay the full amount collected as tips to the tronc.

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By I'msorryIhaven'taclue
24th Jan 2024 08:22

I tipped my barber a five pound note last weekend, but could see the salon owner eyeing it up greedily. I had the feeling it would end up in a communal jar, with the owner dipping his beak.

Maybe it's time serving staff got themselves a SumUp machine, so that they're able to accept tips directly.

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Replying to I'msorryIhaven'taclue:
paddle steamer
By DJKL
24th Jan 2024 10:29

How much do you pay for your barber!!!!! I used to pay £7 but they retired (same barber from mid 1970s until 2 years ago), now I am up to £11.

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Replying to DJKL:
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By FactChecker
24th Jan 2024 12:35

Well ...
a) you're from the land where parsimony is seen as the highest virtue;
b) for all we know you may be bald as the proverbial coot! :=)

Down here (in the Great Wen), I certainly wouldn't approach someone carrying a cut-throat and suggest he should charge under £20.

Mind you, after 50 years your barber must have had customers who'd gone full circle in response to the ubiquitous 'something for the weekend sir?' ... from a sense of optimism, through the years of feigned boredom, and back to optimism!

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Replying to FactChecker:
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By I'msorryIhaven'taclue
24th Jan 2024 13:23

DJKL's a short, back and shine!

I paid £14 plus a £5 tip.

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Replying to I'msorryIhaven'taclue:
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By Michael Davies
25th Jan 2024 10:00

Pre covid as a pensioner I was paying £9;the same barber now charges £15.I no longer tip.Unless almost “mandatory”,I no longer tip for service,unless the server does really go the extra mile.
Like most of us post covid,I only carry a small number of notes and cannot remember the last time I carried/used coins.I actually do not think I have any.

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