It is almost expected after a meal to leave a tip for the waiter/waitress, however few people realise the consequences on the employer of leaving that tip. If the tip is distributed to the waiter/waitress by the employer it becomes subject to National Insurance, this can often be the case when tips are added to the credit card slip or cheque. If however the employer has no direct or indirect say in how the tips are divided between employees National Insurance can be avoided.

In many instances tips are paid into a pool known as a tronc and the troncmaster decides who gets what. The troncmaster must not be a director or officeholder of the company and the employer must have no influence over how the tronc is divided. The Inland Revenue of late have been taking a great interest in whether the employer has any influence over the tronc to establish whether National Insurance should have been paid. Various ideas have been used by the Revenue to suggest that an employer is involved, many of these have been found to be unjust and advice should be sought to establish whether the Revenue are trying to use the legislation in their favour.

Finally an important point to note is that the tronc does remain subject to PAYE and it is the responsibility of the troncmaster to deduct and pay this over to the Inland Revenue. It is only National Insurance that can be avoided by having no involvement from the employer.