The Income Tax (Pay As You Earn) Regulations 2003

Tips: special arrangements

100.—(1) This regulation applies if an organised arrangement exists for tips to be shared among employees by a person (“ T”) who is not the principal employer.

(2) On becoming aware of the existence of an arrangement, the principal employer must notify the Inland Revenue about the arrangement giving T’s name, if known.

(3) For the purposes of these Regulations—

(a) every payment made to an employee by way of the employee’s share of tips by T (including the retention by T of T’s own share if T is also an employee) is regarded as a relevant payment by T; and

(b) to the extent of any such payment, T is regarded as the employer.

(4) But if in any case the Inland Revenue are satisfied that T has failed to comply with any of the requirements of these Regulations and they so direct, then—

(a) any tips paid to T through the principal employer for sharing among the employees are to be dealt with in accordance with paragraph (5), and

(b) any other tips may be taken into account by the Inland Revenue under regulation 14(1)(b) in determining the code for each employee.

(5) If this paragraph applies—

(a) the principal employer is treated as the employer for the purposes of these Regulations in relation to the tips;

(b) T must, before the principal employer pays any tips to T, give the principal employer such particulars of every payment by way of the sharing of tips to be made to an employee as may be necessary to enable the principal employer to comply with these Regulations;

(c) the principal employer must, on making any payment of tips to T, deduct or repay tax in accordance with these Regulations in respect of the amount of such tips to be paid to each employee, and notify T of each amount so deducted or repaid.

(6) Paragraph (2) does not apply if the arrangement came into existence before 6th April 2004.

(7) In this regulation—

“the principal employer” means the person under whose general control and management the employees work;

“tips” means gratuities and service charges.