Service charges, tips and gratuities can be a minefield if not handled properly. The taxation treatment of these items depends on careful structuring and handling of the arrangements between guests, staff and management.
The term ‘tronc’ is used to describe the pool through which tips, gratuities and service charges are distributed to staff. The word derives from the collection box into which such tips were traditionally placed.
There are strict requirements for HM Revenue & Customs to accept that a tronc exists for the distribution to staff of payments which are free of National Insurance deductions to the employee and employer.
How does CHR Hospitality help with troncs?
CHR Hospitality can assist with setting up the relevant payroll records for an approved tronc.
CHR’s payroll services can accommodate the processing of a hotel’s normal payroll and any approved tronc in compliance with the HMRC requirements, and incorporating the resultant data in employee payslips and the hotel’s accounts and labour cost reports.
All CHR’s payroll service clients are given copies of the guide to the treatment of service and cover charges, tips and gratuities published by the British Association of Hospitality Accountants. Access to more detailed specialist advice can also be provided.