Many will agree that when we tip we do so to show gratitude for the service received. We see it as a little extra, a token of appreciation for the work well done. Unless it’s added as a mandatory service charge, a tip is nothing more than a voluntary gift to say ‘thank you’ for looking after me. Yet what we don’t realise is that a tip left for staff triggers a complicated chain of actions that must be followed to fulfil HMRC guidelines regarding tax on tips.
Manchester based entrepreneur, Renate Kalnina is determined to change how tax is treated on voluntary tips and has started a petition for the abolishment of tax on voluntary tips.
“As a founder of Gratuu tipping solution I am seeing many wrongs in the industry that this simple change in legislation can set right. I am willing to devote my time and energy to address this matter.”
This petition argues that tips are voluntary gifts given to individuals for good service therefore, should be treated as such and given tax exempt status.
Moreover, tax gained from tips was IGNORED for furlough during Covid19 pandemic. Such double standards require to be challenged!
We live in a post pandemic cashless era and the reduction of cash use in society is affecting cash tip earnings. Tax abolishment would be a small but attractive measure that helps the industry move towards recovery.
Also a growing number of proprietors refuse to process card tips due to the cost and PAYE administrative burden resulting in further loss of tips. The new legislation introduced by the government in 2021 means that tips and service charges have to be passed on to staff in full. While this is fantastic news for staff, it means just one thing- proprietors will be left to absorb the administration, processing and National Insurance contribution overhead costs unless they employ 3rd party tronc masters to deal with the latter.
“As a registered tronc master Gratuu is required to run a PAYE on all tips that are pooled and we see first hand that tip administration is costly and often benefits accountants more than staff or employers”, continues Kalnina.
“Above all, due to complicated HMRC guidelines on tip pooling, staff are at risk of accidental tax evasion. Time and time again we see a lack of knowledge when it comes to tax administration on tips. I have seen mistakes made in beauty parlours, coffee shops and by teams of big pub chains to name a few. In most cases it is unfamiliarity with existing HMRC guidelines that put staff at risk of tax evasion.
For years we have been working to simplify the tipping process using technology for customers and staff. Now it is time that we address the one issue that directly benefits hard working folk of the service industry. ”
For a petition to be discussed in parliament it requires 100,000 signatures that must be gathered within 6 months ending on 4th July 2022. To support the cause please sign the petition now! https://petition.parliament.uk/petitions/604500
