From CCH's latest e-CPD update (summarised in my own words):
If you're working in a restaurant / bar / bistro, and tips are paid to you directly by the restaurant / bar / bistro's customers, you have to declare that income on a Self Assessment Tax Return every year and pay tax to HM Revenue.
But if your employer collects all the tips and shares them out between you and your colleagues, the employer has to operate PAYE on the tip money, so you don't have to worry about it.
And if someone other than your employer collects the tips and shares them out, that person may be a "troncmaster" who counts as an employer in his/her own right and so has to operate PAYE.
And the National Insurance gets even more complicated.
Crikey... and the bar staff are probably only trying to earn a few quid to help them get through university without a gi-normous student loan debt to pay off.
Why does it have to be so complicated?
Because declare any income tax-free and you run the risk of other income being falsely declared as that - and other complications. For example:
If tips were tax-free... then restaurateurs would pay their staff NMW (because they have to)... and anything else paid to staff would be classified as tips... and then the staff would have a job to get a mortgage because their P60 would show only a fraction of their income... and you're in a Gordian knot.
So in this case, perhaps it is easier to say that if staff collect their own tips, they must declare that as self-assessment income. But I hope that restaurateurs who let their staff do that, warn them that they have to do tax returns...
I personally don't think it is realistic to expect people in these low income jobs to pay tax on their tips and i suspect the amount of people doing it is less than 1% of the market.
ReplyDeleteThe simple fact is that the government know it's going on and I'm sure there not going to investigate every employee of every restaurant, bar or hairdressers to get the few quid back owed to them. I think its harmless to let this go on generally this money is used to pay for things to get people through the week including transport or fuel or maybe a cheeky pint down the pub.
One thing i would recommend instead of a tip, when in a bar, offer a drink to the bar attendant. Pubs usually offer a system where employees can collect drinks using the till system and then when they decide to come in out of work times they can collect their drinks. Is there anything to legislate against this?
In any case i think this level tax fraud is similar to doing 31 miles per hour in a 30 in the middle of the night. It really makes no difference over all and if people had to file tax returns would staff really go through the bother?