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HMRC internal manual

National Insurance Manual

Tips, gratuities and service charges: Tronc arrangements: Examples: Example 1 - Troncmaster required to operate tronc in accordance with employer’s wishes

The facts

Frank owns a pub and restaurant. Tips paid by cheque, debit and credit card are allpassed to Sharon, the troncmaster, who has been appointed by Frank. Frank requires Sharonto operate a points system he devised which determines who will get paid from the troncand how much each employee will get.


Frank is indirectly allocating the tips because Sharon is effectively carrying outFrank’s wishes as regards allocation of the tips. Neither of the conditions in thegratuity disregard are satisfied, (NIM02905). All tips paid outby the tronc will be liable for NICs. Frank will be liable for operating NICs on thepayments.

But if Sharon decides to adopt and use the points system and there is no element ofcompulsion, then Frank has not been involved in the allocation and NICs are not due. Eventhough Frank has appointed Sharon as troncmaster he has played no part, directly orindirectly, in the allocation of the tips because he is not involved in determining whoshould receive tips and how much each employee should receive. In these circumstances, noNICs will be due on the tips received by the tronc members.