Restaurants could be stopped from adding a discretionary service charge to bills under Government plans to remind consumers that they do not have to tip when eating out.
Sajid Javid, the Business Secretary, is today launching a consultation on tipping amid concerns that restaurants are confusing customers by not being transparent about the charges and who actually receives any tips.
One option under consideration is to prevent restaurants “from suggesting any specific discretionary payments” to make it an “opt-in decision” for customers.
Many restaurants add a 10 or 15 per cent service charge to their bills. Ministers are concerned that this often leads to “double tipping” because customers do not notice that they have already paid a service charge before leaving cash for their waiter.
A service charge is not a tip: a tip is not a service charge.
A service charge (“10% has been added to your bill”) is the property of the business, the company. It is subject to VAT, can be distributed absolutely however the management want and if it goes to staff pays income tax and both sets of NI.
A tip is a tip. It belongs to the waiting staff and to them only. It is not subject to VAT, it pays income tax and neither set of NI.
They are very different things. They are legally distinct as shown by the difference in taxation. So if people are going to discuss this issue then they need to understand what the fuck they’re talking about.
The “suggested service charge” you sometimes see on a bill is, legally, a tip. Because you can say that you don’t want to pay it. And so, you don’t. That puts it into that tip legal category, not the service charge one.