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HMRC internal manual

National Insurance Manual

Tips, gratuities and service charges: Troncs: Right to participate in a tronc


Employers in the catering and service industries commonly include the right toparticipate in a tronc in employees’ contracts of employment.

Published views before 17 February 2006

In the booklet E24 Tips, Gratuities, Service Charges and Troncs issued in February 2004IR expressed its, then held, view that where employers gave employees a right toparticipate in a tronc they were influencing or determining the amounts to be allocated toemployees and therefore condition 2 of the gratuity disregard (NIM02922)could not be satisfied. After considering legal opinion in June 2005 HMRC published arevised view in booklet E24. The view held at that time was that where employees had aright to participate in a tronc the payments from a tronc were contractual and notpayments of or in respect of gratuities or offerings, so the gratuity disregard (NIM02905) could not apply.

Published views from 17 February 2006

After considering further legal opinion HMRC’s current view is that a right toparticipate in a tronc does not prevent either of the conditions in Paragraph 5 from beingmet.

So, even in this situation, provided the employer does not determine who should receivetips and how much each employee should receive, condition 2 of the gratuity disregard issatisfied so there is no NICs liability. HMRC announced these changes on its website on 17February 2006.



Shelagh, the proprietor of a restaurant, includes in the employment contract of all her employees a right to participate in the tronc, which leads her employees to expect they will receive a share of the tronc as a whole. Shelagh does not get involved in allocating the payments nor does she make any further payments to supplement the tips payable.


Tips paid by the tronc in such circumstances will not be liable for NICs. Although there is a right to participate in the tronc there is no contractual right to receive payments of any specified amount out of the tronc.

Effect of change of view

IR’s and HMRC’s views are changes to our interpretation of existinglegislation (NIM02905) following consideration of legalopinion. The legislation has not been amended. Where NICs have been paid in error becausethe contributor has followed the available published guidance they may be entitled to arefund of those NICs. When guidance was revised in both June 2005 and February 2006procedures were put in place to allow those who paid NICs in error to claim refunds.