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HMRC internal manual

National Insurance Manual

Tips, gratuities and service charges: payments in respect of gratuities or offerings

Providing either condition 1 or 2 of the gratuity disregard is satisfied (NIM02905) payments of, or in respect of, a gratuity or offering are disregarded from earnings. The words in respect of are wide and general. They mean no more than the existence of some link between the payment in question and a gratuity. So, where a customer pays a gratuity to an employer and the employer passes some or all of the gratuity to an employee either directly or indirectly, the payment made to the employee is in respect of a gratuity or offering.

Where customers pay gratuities, tips, or voluntary service charges to the employer, and the employer then passes on all or some of the payments to a tronc (see NIM02941 for information about troncs) for distribution to employees, the payments from the tronc to the employee are not gratuities but are payments in respect of gratuities.

Example - Payment in respect of a gratuity


Customer adds £20 gratuity to his credit card transaction. The £20 is the employer’s property, see NIM02931.

The employer pays £15 direct to the employee but retains £5 to cover his credit card fees and administration costs.


Although the £15 paid by the employer is not a gratuity, it is paid from the employer’s funds, its original source was the gratuity paid by the customer. So, the £15 is a payment in respect of a gratuity.