Inland Revenue under fire for regulation of cash tips
by Max Gosney
Pub owners have condemned proposed new Inland Revenue guidelines that would allow operators to use service charges to bump up staff salaries to the minimum wage.
The Inland Revenue's proposals aim to regulate the payment of tips or "troncs" to staff and prevent rogue restaurants paying gratuities to workers without declaring them for tax.
The launch of the guidelines follows a two-year Inland Revenue investigation called "Operation Gourmet".
Match Bar Group owner and former city banker Jonathan Downey, who was hit with a hefty tax bill earlier this year after a misunderstanding over his staff's tips, said encouraging operators to use service charges to top up workers salaries to the minimum wage was "wrong".
He said: "What they are doing is giving validity to restaurants who underpay staff. It's immoral to endorse this practice.
"I pay my staff above the minimum wage and they get 100% of any cash tip. It's obvious by the acclaim our venues receive that this boosts professionalism and reduces staff turnover."
Inland Revenue proposals could lead to the introduction of unpopular added costs for diners, according to Ian Martin, proprietor at the Freemasons pub in Wiswell, Clitheroe, Lancashire. "I ask that customers wanting to tip do so with cash and I'll pay it direct to staff. I disagree with any service charge because it should be at the customer's discretion whether they tip. Why should they pay 15% extra on a meal if the service has been lousy?"
Shell Makwana, spokesman for the Inland Revenue, defended the new guidelines.
"We are attempting to improve understanding of the tronc system."
"We appreciate that most are totally legal, but we must target the minority who are escaping National Insurance through undeclared tips," he added.
Whose tip is it anyway?
Peter Coulson, the MA's legal expert, said:
"Any gratuity is the property of the restaurant proprietor. It is at the owner's discretion how much of each tip a worker receives. As the gratuity is considered part of the employee's earnings it's liable for National Insurance deductions. For more information visit www.inlandrevenue.gov.uk
