With all of the recent talk about the possibility of introducing legislation to control how tips are dealt with in Restaurants and other industries where tipping is common place, my mind wanders to what must be millions of pounds in lost tax due to the almost certainty that some tip income is not being declared by waiting staff!
Setting aside the general discussion of who has what, it is pretty clear that cash tips left on tables or given directly to waiting staff belong to those staff and not the restaurant and are taxable income to the recipient and must be declared to HMRC. Failure to declare is, of course, serious tax evasion.
We need to put this into modern context as with the introduction of the minimum wage, the argument that tips are essential to augment the income of waiting staff is no longer vaild and in some cases, the tip income is substantial bonus income. One of my clients suggested to me that some of his waiting staff are receivig between £50 and £100 in tips each session and this is quite credible if 10% is taken as the norm.
My calculations are that - say £75 per day for five days a week for 48 weeks a year amounts to £18,000 per annum and if this is not being declared to HMRC the loss of tax is at least £3,600
I remember the days when the Code Numbers of waiting staff were restricted by estimated tip income but I do see any evdence that this happens widely now.
I believe that the mumblings about Tip Legislation will be a bit of a surprise to some when the detail starts appearing as the Goverment are unlikely to miss the opportunity to take more control of the tipping system AND introduce appropriate legislation to ensure significantly more compliance to the taxation of tips taken by waiting staff.
What do others think?