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Re the Tips info Confusion often arises regarding tips and gratuities as the tax and NIC treatment depends on how they are paid to the recipient.
Cash tips handed to an employee, or left on the table at a restaurant and retained by that employee, are not subject to tax and NICs under PAYE, but the employee will need to declare the income to HMRC - HMRC often make an adjustment to the employee's PAYE tax code number to reflect the amount likely to be received during a tax year so any liability is collected via the payroll. By contrast, if an employer passes tips to employees that are either handed to him (or the employees) or left in a common box/plate by customers, the employer must operate PAYE on all payments made.
Tips will also be subject to PAYE if they are included in cheque and debit/credit card payments to the employer, or if they pass service charges to employees.
Amounts paid by a customer as service charges, tips, gratuities and cover charges count towards National Minimum Wage (NMW) pay if they are paid by the employer to the worker via the employer's payroll and the amounts are shown on the pay slips issued by the employer. Tips given directly to the worker by a customer do not count towards NMW pay. --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
An interesting piece especially as there has been some very adverse press comment recently about a few restaurant chains who have been keeping the debit/credit tips payments for themselves rather than pass them on to the staff.
I didnt realise that the 'count towards NMW' issue! I for one have never seen a tax code altered by HMRC to reflect any cash tips and would hazard a guess that there is still a lot out there that is never reported.
Only other thing worth mentioning is that such employers should look at the tronc system http://www.hmrc.gov.uk/manuals/nimmanual/nim02941.htm
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Amounts paid by a customer as service charges, tips, gratuities and cover charges count towards National Minimum Wage (NMW) pay if they are paid by the employer to the worker via the employer's payroll and the amounts are shown on the pay slips issued by the employer. Tips given directly to the worker by a customer do not count towards NMW pay. --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
An interesting piece especially as there has been some very adverse press comment recently about a few restaurant chains who have been keeping the debit/credit tips payments for themselves rather than pass them on to the staff.
I didnt realise that the 'count towards NMW' issue! I for one have never seen a tax code altered by HMRC to reflect any cash tips and would hazard a guess that there is still a lot out there that is never reported.
That info is wrong Joanne. I thought so this morning, but didn't check it out as I should have done.
From 1 October 2009, service charges, tips, gratuities and cover charges can no longer be used to make up national minimum wage pay . This means that all eligible workers must receive at least national minimum wage in base pay with any tips they receive being paid on top.
It used to be that they did count towards nmw, and many of the large firms were doing so, but the Unite (and the Daily Mirror) launched a s successful campaign to shame employers, and was legislated against in 2009.
https://www.thecaterer.com/articles/322340/tips
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
I've spent quite a bit of time researching the best way to treat tips/service charges and had a momentary panic when I read that! Thanks John, that's saved me doubting myself and my methods.
Is it not swings and roundabouts with that document having no real legal standing? The only legislation here is NMW.
The business can keep the tips (its only a best practice document that requires that they are passed to staff) and use the money for staff wages which will go towards their NMW base salary.
The only difference that the 2009 change in legislation made is that a business cannot call it tips that are making up the NMW but that does not mean that the money that is used is not from that source.
Cash tips however will go directly to the staff but I don't think that there was any contention over that one.
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Of course Shaun. If the employer makes a service charge it's up to them if they pass it on. However if they do pass it on it can't make up part of the NMW, it has to be paid on top.
Given that BKN said "Amounts paid by a customer as service charges, tips, gratuities and cover charges count towards National Minimum Wage (NMW) pay if they are paid by the employer to the worker via the employer's payroll and the amounts are shown on the pay slips issued by the employer" then that info is incorrect.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Concurred, my point was simply in relation to the elephant sized loophole in the legislation where money paid as tips, gratuities and cover charges can indeed go towards the staff NMW... It just can't be referred to as such and tyhe direct link must be lost but it is the same money used for the same thing.
Lol, every time I go through things like this I have an anchoring to be standing in front of a whiteboard demonstrating it... Guess you can take the boy out of corporate but you can't take the corporate out of the boy.
All the best
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
