Tronc : Tips and service charges in Restaurant /Pub trade

HMRC has given its guidance in publication E24.


Tronc is special arrangement allowed by HMRC for catering trade to distribute tips received from customers.


Main takeaways from the guidance are as follows:


1- If tips are optional, no VAT is to be charged.


2- Income tax is to be deducted from tips in all circumstances.


3- NIC is not due on tips (extract from PAYE 72080), if :

A – Customers pay tips direct to employees and the employer is not involved; or

B – i) Customers pay voluntary service charges and / or tips to the employer; and

ii) The employer passes some or all of the charges / tips to a tronc; and

iii) The employer is not involved in deciding how much each tronc member receives from the tronc.

4- Employers must pay their staff atleast National minimium wage in addition to tips.


In effect tronc system saves National Insurance Contributions of both employer and employee.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s