Who gets the tip?

dickywink

Hi all, this is my first post here on this forum so firstly i would like to say hello

as a restaurant owner myself ... i find this a wonderfull topic and discussion ... and i have recently had experience with the legislation for tipping that i would like to share

we have been running our restaurant for 10 years and our staff are paid above the minimum wage... and since we opened myself and my wife set up a policy that any tips received would be evenly distributed between all the staff .... we did not include ourselves as we felt it unfair for the owners to take tips given by our customers ..... we even gave staff the full value of tips left by customers on credit cards even though we had 3% of that value deducted by the credit card company

then in 2006 we had a routine tax investigation by the HM revenue and customs .... one of the points that were raised was TIPS

they told us that tips were treated as additional income and therefore were subject to national insurance and income tax .... and that it was our responsability to deduct this from the amount received from customers

I had always seen tips as a gift from customers who apreciate good service ( and a smile )

We were finaly given a tax demand backdated for the previous six years for the estimated tax to be paid on tips ( approx £4500 demanded ) i was gutted

The outcome was we had to pay ... plus we now have to deduct the NI and PAYE from any tips recieved ( and this has to be calculated per individual because of each persons tax allowence )

so when huggermugger said

She said that it didn't make a lot of difference as she had to turn the cash into the manager and it came back to her "after they'd taken expenses for the business out of it". What????

I can understand this if they are deducting tax ....

also ( as we found out ) any restaurant that distributed tips without making the NI and PAYE deductions are breaking the Law

we dont demand the customer pays tips ... infact we say on our bill that its down to the customers discretion if they want to give a tip, and i am certainly against service charges ... if i eat out at a restaurant and i get good service and a smile i certainly leave a tip

all the best ....

Dicky

lilac_lady

If I'm ok with the food and service I've received I give a tip but since the publicity about who gets the money I ask the waiter/waitress that question. If the staff get the full amount I donate a tip but if the management takes any of it I don't tip.

jsp_1983

Continuing with my stingeyness...

I rarely tip. Why should I? I've worked lower-wage jobs where tipping isn't de rigeur and still managed to do what's expected of me, so why should somebody expect to receive a tip just for doing their job? Because it's hard work? Lots of jobs are. It's even more unfair to expect a lower-waged customer to tip another lower-wage worker.

I will tip on the occasion that the service has been exceptional and beyond expectation.

I also take exception to restaurants in London automatically adding a 10% gratuity. I make a point of telling them to take it off - the point of a discretionary gratuity is that it's at the discretion of the customer. Adding your own donation from the customer to the bill is very, very rude.

In a restaurant, my experience is that kitchen staff work harder and in less pleasant conditions but are far less likely to see a 'fair' share of waiting-on staff tips.

psdie

dickywink wrote: »

.. We were finaly given a tax demand backdated for the previous six years for the estimated tax to be paid on tips ( approx £4500 demanded ) i was gutted.

The outcome was we had to pay ... plus we now have to deduct the NI and PAYE from any tips recieved ( and this has to be calculated per individual because of each persons tax allowence )

Dicky - thank you for this balanced insight into the restaurant's perspective. Hmmm, that's rather knocked me off my rant - I hadn't realised HMR&C have got their grubby mitts in on the act too

So that leaves us with either tipping "under the table" - i.e., server keeps it secretly (and risks being sacked), with the downside that the chef doesn't see a cut - or tip distribution (+ choice of "deductions") is left to the whim of the restaurant owner, with the greedy backing of HMR&C (talk about squeezing the poor!).

I guess this firmly highlights the importance of MSE's "Who gets the tip?" campaign. It should be compulsory to show a public notice (pref on the bill) explaining how tips are distibuted between staff (including WHICH staff) and what specific deductions are taken from the tip.

Cheers, Ben

psdie

Hmmm ... further to the above, Business Link says that the restaurant does NOT have to deduct anything from tips, provided they are kept by the member of staff they were given to. See here.

If they are pooled by the restaurant and distributed to staff (or is a compulsory service charge), then the restaurant must deduct NIC and PAYE. If an independent "troncmaster" independently handles distribution of tips, however, then NICs are NOT due (but PAYE is). See here.

That complicates the picture somewhat!

Tali_2

dickywink - Tips are only taxable if paid to the employer as part of the bnill and then distributed to staff; if paid directly by the customer to the employee it does not involve the employer and so falls outside the tax system.

PeterJDavies

Tali - your advice here is dangerously misleading. When a tip is paid via a business (i.e. via a service charge or on a card) then it is taxable at source under PAYE. Any other tips (eg cash) is still taxable, but it's for the waiter to declare it to HM Revenue & Customs at the end of the year. Not to do so is tax evasion and illegal and will lead the waiter into a whole heap of trouble.

psdie - tax must always be deducted, but not necessarily NIC. There is a specific legal exemption from NICs if certain conditions are met. The reason that most restaurants operate a tronc is to take advantage of that exemption which saves the waiter 11% and the business almost 13% of the value of the tip.

dickywink - did you speak with a professional adviser who really understands these issues? Looks like HMRC have blustered and threatened you into paying something that you may not have had to pay. Remember HMRC are there simply to part you from your cash and if you don't understand the intricacies of the law they won't tell you.

Peter

little_girl_lost

I work in McDonald's I'm 21 and on £4.90 an hour.
I never get tipped, but if I dont tip in a restaurant I feel they will think badly of me and serve me badly next time but I cant afford to tip a full 10%.
In my opinion tipping should be banned. Its too much of a grey area.

psdie

little_girl_lost wrote: »

I work in McDonald's I'm 21 and on £4.90 an hour. I never get tipped, but if I dont tip in a restaurant I feel they will think badly of me and serve me badly next time but I cant afford to tip a full 10%.

Hi LGL - IMO in the UK, tipping is *only* customary if the customer's order is taken and served at their table. If the customer has to order drinks/food at the bar / till (i.e., no waiter/waitress will look after them during their meal, including buffets, fast food, some pubs) then no tip is due.

If you are on genuinely low income, then I personally think it's perfectly reasonable to reduce the % that you tip accordingly. I personally think it's inpolite not to tip at all if you get great service (attentative and with a smile) and great food (relative to the level of menu prices) to your table, and can afford to do so.

Having said that, my own mum refuses to tip out of principle! I set out when I tip earlier - up to 10% for great food/service at my table.

psdie

PeterJDavies wrote: »

psdie - tax must always be deducted, but not necessarily NIC.

Incorrect if tip is paid to and kept by a single member of staff, according to the linked Business Link article. No PAYE or NIC deductions are required by the business in this circumstance.

As another mentioned, the member of staff should *in theory* declare on their personal tax return, in the same way as you should declare income from selling a book on eBay. In practice, if the income from this is minimal and doesn't affect the member of staff's tax bracket, HMR&C are not going to be too bothered, and rightly so IMO.