Hospitality businesses were today warned not to panic following a successful appeal by HM Revenue & Customs against an Employment Tribunal decision last September.
The case involves top Mayfair members club Annabel’s and relates only to 2004 and prior periods, well before the 2007 acquisition of the business by its current owner. The case looked at whether or not tips paid to employees via a pooled “tronc” system counted towards the National Minimum Wage. HMRC alleged that workers, some of whom were reported to earn enough to pay 40% tax, had not received their Minimum Wage because their tips were paid to them by a troncmaster rather than by their employer. A troncmaster is a member of staff who decides how the tips will be shared out. Had the troncmaster instead told the business how much to give to each person and not physically paid the money themselves then, HMRC conceded, there would have been no problem.
Peter Davies from accountants Vantis, who assisted the company, expressed disappointment and commented that “this was a classic case of form over substance. Everyone accepted that Annabels’ employees were highly remunerated and that the alleged underpayment arose only because of an administrative procedure. The company has complied fully with HMRC’s interpretation of the law since this matter was brought to its attention back in 2004.” He went on to say that the Judgement raised as many questions as it answered. “If”, Davies noted, “these monies now belong to the troncmaster it could result in a whole set of legal obligations, such as having to submit accounts to HM Revenue & Customs. Surely extra red tape and regulations are the last thing that anyone needs”.
The majority of businesses will be unaffected by this ruling as it is now normal for companies to receive instructions from their troncmasters and pay their employees directly, rather than the more old-fashioned system of handing cash to troncmasters.
The company fully intends to appeal against the decision.
For further information, please contact Peter Davies on 020 7417 0417, email peter.davies@vantisplc.com or enter your details and submit the online form below.