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Tips victory for HMRC

16 June 2008
Categories: News , Admin , Income Tax
Tribunal rules that gratuities do not count towards minimum wage

HMRC have secured a victory for service industry workers in the debate over whether tips should count towards the national minimum wage.

An employment appeal tribunal has ruled in the Revenue's favour in the case of Annabel's restaurant and nightclub, with the outcome that employers must pay their employees at least the minimum wage regardless of any gratuities, service charges or similar - so long as they are not paid directly through the business's payroll.

HMRC argued that payment via a tronc — the system of pooling and distributing tips to workers in the service industries — does not count towards the minimum wage.

The judge determined that where restaurant or bar service charges are paid by the customer to the employer but are then paid into a troncmaster's bank account for distribution the sums so distributed to employees are not 'paid by the employer' for the purposes of being included in any minimum wage calculation.

Annabel's have until 27 June to seek permission to appeal the judgment.

The decision is a reverse of that in October last year, when HMRC lost an employment tribunal appeal case against Annabel's involving the interaction between the national minimum wage and troncs. The Revenue was given leave to take the case to the High Court.

HMRC national minimum wage business manager Denise Gaston said: 'We are very pleased that the court has recognised [our] commitment to ensuring that tips are correctly and fairly distributed to the people who earn them'.

Sections - income tax and NI

Categories: News , Admin , Income Tax
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