Tips received by employees are almost invariably taxable as part of their employment income but practical issues arise in relation to the collection of the tax. ‘Tips’ are for these purposes defined to include both gratuities and service charges (ITEPA 2003, s. 692).


A ‘tronc’ arrangement is one in which tips to hotel, restaurant or other staff are pooled and then distributed by a person (known as a ‘troncmaster’) other than the employer. Special tax rules apply to such arrangements (SI 2003/2682, reg. 100). HMRC guidance may be found in E24

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