Tips and gratuities are popular within the restaurant and hairdressing trades – are you as the employer dealing with them correctly?
What is a Tip?
A tip could be regarded as a good bit of advice, but in the world of the restaurant and hairdressing trade this is a spontaneous payment offered by a generous customer after receiving a good service either in cash of as a specific gratuity added to a credit/debit card payment.
Who is responsible for the Tips?
If a customer has a hearty meal and decides to tip the waiter/waitress for the pleasure and the cash tip is given directly to the employee or left on the table, the employee keeps this payment without any involvement from the employer. Therefore no PAYE implications apply. It is then the responsibility of the individual employee to advise HMRC of the amounts of money received. The tax will usually be recovered by an adjustment in the employees PAYE tax code. However, if Tips are paid out by the Employer to employees, there is a responsibility for operating PAYE which rests with the employer.
Thought about setting up a Tronc Scheme?
An easy way to distribute tips to your employees is to set up a tronc scheme. This is an ideal way to ensure that tips are shared correctly, especially in the restaurant business to make sure that the valuable chefs and kitchen staff get their share. The task of distributing the tips is delegated to a staff member, known as the Troncmaster. The employer must inform HMRC that a tronc is in place so that HMRC can identify the person responsible for PAYE.
Troncs & PAYE
A PAYE scheme will be set up for the tips in the troncmasters name. The troncmaster then will be personally responsible for all aspects of operating the PAYE scheme. The tronc PAYE scheme must be entirely independent of the employers scheme and must be operated as such.
Do you need help operating a Tronc Scheme?
Here at Thomas Nock Martin Limited a large number of our clients are in the restaurant and hairdressing trade. Almost all our restaurant clients operate a tronc scheme. However, we take the burden off our clients by dealing with the task of PAYE for them. If this sounds good to you then why not contact me at firstname.lastname@example.org and we will be happy to help.
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