This part of GOV.UK is being rebuilt – find out what beta means

HMRC internal manual

National Insurance Manual

Tips, gratuities and service charges: Gratuity disregard conditions: Condition 1

Paragraph 5(2) of Part 10 of Schedule 3 to the Social Security (Contributions)Regulations 2001


  • an employer does not pay gratuities or payments in respect of gratuities either directly or indirectly to their employees and
  • the payments do not comprise or represent sums previously paid to the employer

the payments can be disregarded from earnings. This is referred to throughout thismanual as condition 1 of the gratuity disregard.

So, where an employee receives payments of gratuities direct from a customer and theemployer is not involved in making the payments, there will be no NICs liability.