IR offers tax break for tips

by Max Gosney

Industry experts have welcomed new Inland Revenue guidelines relaxing the taxing of tips at pubs and restaurants.

The Government's updated legislation means operators can use tips to boost staff salaries and these top ups are not subject to National Insurance (NI) payments. The amended Inland Revenue E24 guidelines means tips or "troncs" are only liable for PAYE deductions.

Giving employers greater control over the distribution of gratuities will provide a "huge relief" for many caterers, according to the British Hospitality Association (BHA).

BHA chief executive Bob Cotton said: "These concessions represent a significant victory for common sense and they set the scene for a clearer understanding of what remains very complex regulations."

Pub operators also backed the Inland Revenue's clarification of E24 guidelines.

Paul Bloxham, co-owner/head chef at the Cabinet at Reed, Hertfordshire, said: "Any relaxation of tax rules are welcome. The pub trade is in the midst of so many changes in legislation that it's hard to stay on top of it all. But if this means a couple more pennies in my pocket I'm all for it."

However, other industry figures have criticised the Government for its laboured response to confusion over NI deductions.

Match Group bar owner and ex-city banker Jonathan Downey, who was hit with a fine following confusion over tax payments from his staff's tips, said: "These amendments are long overdue and if introduced earlier would have saved a lot of confusion and unnecessary fines."

The new Inland Revenue rules could trigger appeals from operators fined for not paying the correct NI over the past two years. John Whiting, spokesperson at Price Waterhouse Coopers, said: "There is going to be a lot of scope for restaurants to renegotiate their previous fines."

For more information visit the Inland Revenue's website: www.inlandrevenue.gov.uk