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Gaddammit get this right!

Restaurants should give tips to staff, a government minister has declared after wading into the Côte row.
The leading restaurant chain pockets the entire service charge paid by customers, rather than giving it to the staff as tips, it has emerged.
The 12.5 per cent charge is automatically added to bills but goes straight to the company.
Staff are even instructed to say the charge goes to workers if asked about it by customers.
But Business Secretary Sajid Javid said he did not believe the system was fair and revealed that government would be examining the issue.
“While it would not be appropriate to comment on this individual case, as far as I’m concerned, tips belong to the staff,” he said.

“Tips” and “service charge” are two different legal things.

Tips are voluntary payments from the customers and as such are the legal property of the staff and no one else. They are subject to income tax but not NI and VAT.

A service charge is a charge by the business. It belongs to the business. It pays, when distributed to staff (if it is) both NIs and income tax. VAT is charged upon it.

“A recommended service charge is added to your bill” is a bit of a grey area. Back when, if the customer could ask to have it taken off, and it wsa with not problems or pressure, then it’s a tip not a service charge.

But Javid should know this stuff. Tips do belong to staff and it’s theft to take them from them. Service charges do not.

19 thoughts on “Gaddammit get this right!”

  1. I fucking hate service charges. Put the full amount on the menu by the dish not some added extra hidden in some small print on the menu. If there’s one thing the government could do that’s good it is stopping this bullshit.

  2. Some thing else that pisses me off… Was in a restaurant the other week and after ordering the waitress asks if we want water. Said yes please. she brings an opened bottle and bills us a fiver for it. Never going there again. cheeky cunts.

  3. What in Javid’s experience would suggest him more likely to know this stuff than any other member of the Westminster zoo?

    If he had worked in a restaurant … If he had experience with retail accounting or tax law … If he bothered to ask one of his experts before opening his great big politician’s gob …

    But then, barring the very first, he wouldn’t be where he is, would he?

  4. And, in pointless pendantry because I am now fully awake and not yet caffeinated:

    We can confirm that, contrary to recent press reports, Côte distributes the service charge income to the restaurant level employees at which the service charge was collected.

    From their website. I know what they were trying to say:

    “to the employees* at the restaurant at which …”

    But they didn’t, did they? I suppose they are a ‘French’ restaurant, so could be affecting not being able to write proper English.

    * “restaurant level” could actually be meaningful here – i.e. not the manager. But it is less than obvious. To people not in the trade. To whom this message is supposedly addressed. And journalists probably don’t speak restaurant staff jargon either.

  5. “Tips are voluntary payments from the customers and as such are the legal property of the staff and no one else. They are subject to income tax but not NI”

    That’s not a complete answer. Tips left as part of a credit card payment are legally the restaurant owners. Cash tips are legally the waiter’s (with tax but no NI) UNLESS an organised system of distribution to staff is in place at the restaurant in which case staff share as per the agreement and the NI position depends on who is organising the distribution. If the employer distributes NI is due, if someone else, then no NI is due.

  6. I always thought “service charge” WAS tips, only more formalised. I expect quite a lot of other people think/thought so too.

  7. bloke (not) in spain

    I’m with Dongguan John on this. I don’t go into a shop, buy a pair of shoes, get charged 12 1/2% on top of the ticket price for the priviledge of the salesman serving me. Why restaurants?
    And why do I get the idea, this side of the Atlantic anyway, this is uniquely a Brit thing? I must have paid a couple thousand restaurant tabs in the past few years, from Holland down to home turf. They’ve mostly seem to have been the addition of the menu prices. No slipped in service charges. No VAT as a billable extra*. Except in the foreign run restaurants down on the strip, cater to Brits. Which I avoid like the plague.
    Is it because I eat out in the Continental manner? Because I’m hungry & they sell food, not as some sort of social event. So it’s rarely showy establishments. i go the places the locals stoke up.

    *Why? The only reason to show VAT as an extra is if the customer can reclaim it. People who can reclaim VAT on restaurant bills must be quite capable of working out VAT.

  8. People who can reclaim VAT on restaurant bills must be quite capable of working out VAT.

    Because HMRC. Basic: “You must have a valid VAT invoice”

    It is always possible that the restaurant was not VAT registered therefore there is no input VAT to reclaim.

    More detailed:

    Where claims to deduct VAT are not supported by a valid VAT invoice HMRC staff will consider whether or not there is satisfactory alternative evidence of the taxable supply available to support deduction. HMRC staff will not simply refuse a claim without giving reasonable consideration to such evidence. HMRC has a duty to ensure that taxpayers pay no more tax than is properly due. Nevertheless this obligation must be balanced against a duty to protect the public revenue.

  9. bloke (not) in spain

    Sorry SE. Didn’t make myself clear. It’s the nasty practice of showing the pre-VAT price on the menu with a bit of small print at the bottom telling you VAT & service will be added.

    Although, to be fair, do they still do the VAT thing? Maybe mine’s a legacy gripe. Don’t remember paying a UK restaurant bill, myself, for years. There’s quite enough horrible experiences in life without eating out in the UK to add to them. (But I do suffer other’s generosity occassionally.)

  10. b(ni)s

    Ah, I don’t remember seeing that. Certainly not recently. Even in London.

    Also, I can’t remember ever working for an organisation that allowed me to spend more on my meals because it could claim VAT back.

  11. While it’s a cunt’s trick putting a service charge in small print at the bottom of the menu where really does the law stand on it? 1000% in small print hidden on the back and it’s caveat emptor?

  12. bloke (not) in spain

    The word I received from a lawyer mate, years ago, was the prices on a menu were….”an offer to treat”, I think he called it.
    Something to do with you not knowing what you’re being asked to pay for until you get it?
    So you have the recourse of offering to pay what you think it’s worth & let them sue you for the balance. Just leave contact details, so they can do so.
    Would that apply to the service element?

    As someone who’s provided a service to the public, I’ve always been aware the bills I give them are disputable.

  13. theoldgreenfascist

    Well why don’t you get it right Tim? What the payment is called is largely irrelevant. What matters in the main is the contractual relationship between the employer, the employee, and the customer. See leaflet E24 issued by HMRC. I don’t suppose you’ll read it as you know it all already!

  14. That, of course, is not what Leaflet E24 says. Leaflet E24 starts off by defining the difference between tips (or gratuities) and the various types of service charge.

    Tim even manages to cover,despite not having been a waiter for some time, is the difference between mandatory and ‘voluntary’ service charges.

    Remember (or learn?) PAYE ≠ Income Tax.

  15. HMRC has a duty to ensure that taxpayers pay no more tax than is properly due.

    And with that one simple sentence, Ritchie’s whole world comes crashing down around him.

  16. SE – but what you call it has no bearing on its treatment for tax, NIC, or VAT. A service charge may be a gratuity.
    I am quite aware of the difference between PAYE and income tax.
    How do you get these idiots to defend you Tim?

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