Trade's tips victory

Staff tips that are paid through a tronc scheme are no longer liable for national insurance (NI) contributions following a challenge by the trade.

Detailed new guidelines have been issued by Her Majesty's Revenue and Customs (HMRC) on the procedures for distributing tips to staff through tronc accounts.

The guidance follows a long debate between the taxman and the hospitality sector over the practice of counting tips as part of minimum wage payments to staff. Many food businesses operate a "tronc", a separate fund to distribute tips to kitchen and waiting staff. These are bank accounts administered by someone independent of the licensee.

Since these tronc payments are often counted when calculating the minimum wage, HMRC had argued that NI should be paid. Following a legal challenge by the British Hospitality Association (BHA), tax chiefs conceded that this stance was wrong.

Martin Couchman, deputy chief executive of the BHA, said: "The announcement is great news for the British hospitality industry. HMRC has listened to the suggestions we have made and produced clearer and more practical guidance for our members."

Under the new guidelines, known as E24:

- All monies paid through the employer's payroll and identified on payslips count towards earnings for the minimum wage

- National Insurance will only be

due if a specific contractual entitlement exists in respect of gratuities, or if an employer has directly or indirectly allocated the gratuities to

their employees.

For a copy of the guidelines visit www.hmrc.gov.uk/helpsheets/e24.pdf