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Restaurateurs and Caterers

What is a Tronc scheme?

  • Do you pay unnecessary VAT on tips, gratuities & service charges left by customers to your employees?
  • Do you include tips given freely to employees as part of your PAYE operation and pay unnecessary national insurance on such tips?
  • Do you want to save on tax and use tips received by your employees as a means of motivating and incentivising employees and rewarding excellent service and teamwork?

If you answered Yes to any of the question above and would like to know more, please telephone Michelle Anthony on 0151 348 8400 or email ma@moco.co.uk.

It is common practice for customers to make an additional payment on top of the basic charge when dining at a restaurant or other catering establishments. A tip or gratuity is an uncalled for and spontaneous payment offered by a customer either in cash, as part of a cheque payment or as a specific gratuity on a card payment. In contrast, a service charge is an amount added to the bill before it is presented to the customer.

Operators may not fully understand and are not always aware of the various treatments of tax and national insurance contributions (NIC) arising on different arrangements on how tips, gratuities and service charges are shared amongst employees.

A Tronc is a special pay arrangement used to distribute tips, gratuities and service charges. If set up and administered correctly, a Tronc can offer significant savings, particularly in NIC, to both employees and businesses.

VAT & Tips

Tips are outside the scope of VAT when given freely. This is so regardless whether:

  • The customer requires the amount to be included in the bill
  • Payment is made by cheque or credit/debit card
  • Or not the amount is passed to employees

Mandatory restaurant service charges are part of the consideration for the underlying supply of the meals and are therefore standard rated. 

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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