ECH13005 - Particular Occupations: Tips and Gratuities
The tipping of waiters and others working in hotels,
restaurants, clubs etc is an expected feature of the hotel and
catering trade.
As well as their normal wages/salaries, employees of these
trades can receive considerable additional amounts in a variety of
ways, for example
- retaining cash tips left on tables or handed directly to them by customers
- receiving a share of cash tips through a pooling arrangement
- getting a share of tips or gratuities included in cheque payments, credit or debit card payments made to the employer
- getting a share of any service charge made to the employer
All these amounts are assessable to tax on the employees, and
the direct employer or a troncmaster (
ECH13010) may have an obligation to
operate PAYE. The direct employer may also have NICs obligations,
but that will depend on the particular arrangements.
The case worker should
- familiarise themselves with the guidance at PAYE Manual – PAYE Operations – Paymenys for PAYE purposes – Info menu – Tips, Gratuities, Service charges & Troncs
- Chapter 2 of the CWG2 booklet, Employer’s Further Guide to PAYE and NICs
- Booklet E24 – Tips, Gratuities, Services and Troncs and
- establish what arrangements exist for
-
- collecting, pooling and distributing tips and gratuities including
- any sharing of sums paid as part of cheque, credit/debit card transactions and service charges
If the employer has failed to deduct tax or NICs correctly, the case worker should
- seek recovery and
- where appropriate, consider an employer’s claim for equitable liability ECH9030 for payments made to
- students
- married women
- pensioners
Where it is discovered that employees are receiving significant sums and no obligations to operate PAYE exist pass the details to the PAYE Section
