The recent Queen’s Speech tackled the issue of tips and the fact that restaurant staff often do not see the money given to them by a grateful customer. This is partly a result of our cashless society whereby most people pay by card rather than cash and are unable to tip the waiter or waitress direct.
The scope of the proposed legislation is likely to force employers to hand over 100% of the tips they earn. Pretty straight forward one would think. However, where the money is received by the employer then they will be obliged to deduct tax and National Insurance via PAYE. To hand over all the money would require a change in the tax rules and HMRC are not going to be particularly happy about that.
Where the employee receives the tip direct, tax is not deducted at source but the employee will be responsible for paying their own tax on self assessment. Whether many do is a question of conjecture and it is pretty certain the taxman will want to be able to monitor this and, if past performance is anything to go by, deduct tax as soon as possible and, if possible, at source.
A lovely sounding policy but will it work in practice?