dataplan payroll services

Tips And Payroll

Tips And Payroll
Alison Clynes
Written by
Wednesday, 16 December 2009 10:00

Tips have become big news recently. Many people in the catering industry, particularly waiting staff, have been paid below the national minimum wage with tips being used to bring their money to the legal minimum. This is now against the law. However, the confusion surrounding this area has still not been resolved. It is not surprising that an increasing number of employers are using a payroll company to deal with this minefield on their behalf.

It is certainly frustrating to customers as they are never sure whether so-called discretionary service charges are given to staff or just used to swell the restaurant's coffers. More importantly, the treatment of tips for tax purposes has still not been simplified.

There are a number of tax implications around this area. In strictness, if tips are received in cash directly from customers they should be returned by the employee receiving them as H M Revenue and Customs argue that these form part of someone's remuneration. This is good news for the employer as they do not need to get involved.

If, however, the employer is involved in any way in the distribution of tips, even if they simply provide cash in lieu of service charges paid by credit card, they are held to be responsible for the deduction of tax and National Insurance Contributions.

At Dataplan Payroll we are a specialist payroll company. Life is too short to try to decipher the legislation and regulations surrounding the Pay as You Earn system so see what we can do for you as a payroll solution.

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