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HMRC internal manual

National Insurance Manual

HM Revenue & Customs
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Tips, gratuities and service charges: Payments disregarded from earnings

Paragraph 5 of Part 10 of Schedule 3 to the Social Security (Contributions) Regulations 2001

Payments of, or in respect of, a gratuity or offering are disregarded from earnings if either of the following conditions are satisfied.

Condition 1

The payment

  • is not made, directly or indirectly, by the secondary contributor; and
  • does not comprise or represent sums previously paid to the secondary contributor.

See NIM02921 for more detail.

Condition 2

The secondary contributor must not allocate the payment, directly or indirectly, to the earner.

See NIM02922 for more detail.

Regulation 2 of The Social Security (Contributions) (Amendment) Regulations 2004 (S.I. 2004 No 173)

With effect from 23 February 2004 the above disregard was amended to exclude certain payments from the disregard even where condition 1 or 2 was satisfied. See NIM40115 for more detail.