Tax FAQ

Payroll

I run a restaurant where customers pay tips to members of staff. What is the tax position with regard to these?

The tax treatment depends on how the tips are given and distributed to the members of staff.

• If the tips are given direct to the members of staff by customers, there is no deduction of tax. The individuals should self assess for tax purposes.
• If the company operates a "tronc", then the tronc master deducts basic rate tax from the combined tips before distribution.
• If the employer has any control over how the tips are distributed, tax and National Insurance must be deducted through the payroll.