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Restaurateurs and Caterers

Tips & National Insurance Contributions (NICs)

A simplified overview of the legislation provides that payment of tips and gratuities to employees is exempt from NICs if it meets either of the following two conditions;

  • It is not paid, directly or indirectly, to the employee by the employer and does not comprise or represent monies previously paid to the employer, for example by customers


  • It is not allocated, directly or indirectly, to the employee by the employer

The rules for qualifying tips, gratuities and service charges for the exemption from NICs in its entirety can be daunting and complex though. There must be procedures in place to establish whether the payments made to employees are contractual in nature or not and whether you as an employer play any roles in deciding who should receive what amount by way of tips.

A Tronc scheme allows operators to meet exemptions from NICs which will save you and your staff a combined total of almost 26% in unnecessary taxes. These unique exemptions have been in place for over 40 years and are specific to the industry. There is no other business sector that has the ability to legitimately reduce NICs paid by themselves and their employees to such an extent.

It is important to ensure any Tronc arrangements meet all of the conditions for exemption and will withstand an enquiry or challenge from HMRC. Should HMRC find that your Tronc scheme was not set up and operated correctly, they will seek both employees and employers NICs from you, together with interest and penalties.

Morris & Co have a dedicated team specialising in Tronc schemes and are able to act as Troncmaster for your establishment.

For a free no obligation chat about your circumstances, please contact Michelle Anthony on 0151 348 8400 or email ma@moco.co.uk

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