New tipping guidelines issued by Taxman

The Inland Revenue has released revised guidelines which could save on National Insurance bills for pubs which use tips to bring staff up to minimum wage levels.

Their revised 'E24' guidance on tronc schemes - a separate payroll set up to distribute voluntary tips from customers to staff - follow a legal wrangle between the taxman and the British Hospitality Association (BHA),

Tne original guidance was issued after the Inland Revenue's controversial 'Operation Gourmet' clampdown. This included spot checks on arrangements for distributing tips at many of the UK's top restuarants, some of which were handed tax bills running into tens of thousands of pounds.

The new E24 guidance makes changes with regard to what businesses can do with gratuities received, giving more flexibility. Tax specialists believe it will now be more practical for businesses to take advantage of savings in National Insurance contributions and VAT.

Businesses investigated should now see their cases closed altogether by the taxman, or their bills significantly reduced. However Peter Davies, who orginally headed Operation Gourmet and is now a consultant at accountants Vantis Tax, warned that the tronc remains a difficult area to navigate and there are still pitfalls awaiting the unwary.

He said: "Businesses mustn't think that this issue has gone away. Everybody needs to understand the new rules to make sure that they are maximising the savings available but also to make sure that their tronc is E24-compliant. The costs of not doing so are significant."