Tipping Act Code of Practice to bring fairness to employees

Google reviews
June 03, 2024
n

Whenever you leave a tip in a restaurant or a hairdressing salon, for example, you would hope that the tip money you left will go directly to the person who provided you the service you are tipping for. But for many restaurants and other industries, that hasn’t always been the case.

So now, the Government is working on draft legislation known as the ‘Tipping Act’ to bring fairness to sectors where tipping is common, to ensure the people who were being paid the tip get it.

What is currently happening?

In some restaurants, the tips paid by card especially, and sometimes those paid in cash, are controlled by the owner. This means the tips may not reach the workers as intended by the people who left them. The Act intends to change this, by ensuring all employers abide by a Code of Practice which will dictate how the tips should be handled.

The list below includes some of the factors considered by employers, but this isn’t an exhaustive list:

  1. Type of role or work, for example, distribution between front of house and back-room workers.
  2. Basic pay (and how workers are engaged).
  3. Individual and/or team performance.
  4. Seniority or level of responsibility.
  5. Length of time served with the employer.
  6. Customer intention.

Source: Gov.uk

There are various elements to the consultation, and any company that deals with customer tips should be considering what might be expected of them.

Are tips taxable?

For those people who begin getting tips where they weren’t before, there will be a tax implication to consider. All tips are subject to tax, even if they are paid to you in cash. So, you will need to declare these tips to HMRC and pay any money that is due.

Remember, if the tip has been paid as an additional amount on a card, for example, there will also be a paper trail that will allow HMRC to investigate how much money has been tipped within each business. So, if you aren’t sure what to do, you are best to seek advice.

We can help you meet your obligations

If you are going to be dealing with tips and the tax implications of them, whether as an employer or employee, then please ask us for advice and we can explain what you need to know.

Resources

Recent Articles

Inheritance Tax at record levels, but Business Relief can help

Inheritance Tax at record levels, but Business Relief can help

Inheritance Tax (IHT) has reached a record level in the UK, with £7.5 billion flowing into Treasury coffers in 2023/24, up from £7.1 billion the previous tax year. One key reason for this growing tax take is rising property prices - the average house price in the UK...

Everyone should check their tax code now

Everyone should check their tax code now

HMRC will provide new tax codes at the start of every new tax year if the Personal Allowance has changed, if someone has had a change of circumstances, including perhaps had a pay rise, and even to those who are taking their pensions for the first time. It’s important...

Ready to join us?

Whether you’re a contractor, freelancer, or small business, Bright Ideas can help remove the burden of time-consuming and complex finances. We’ll draw on our years of knowledge and experience earned helping sole traders just like you.

When you choose us, you’ll be assigned a dedicated Account Manager who’ll provide one-on-one support that’s customised to your business. Communication is key, so we’ll always answer your questions or requests as soon as we can. In fact, we offer a same-day response guarantee for emails and calls received before 3pm.

Contact us to get started

Give us a call us or send an email today!

Looking to switch accountants?
We make the transition simple.

Does your current accountant give 1-to-1 support? Are they fast and thorough?
Slap-dash services hold businesses back, so try our experts instead.

Move to an accountancy service that goes the extra mile…

Start the conversation

Let’s make your finances Brighter

Call us Monday to Friday 9am - 5pm

0161 669 4221

Request a call back