In 2011 a HMRC Specialist Employer Compliance Officer confirmed it was acceptable for a troncmaster responsible for the collection, allocation and distribution of tips to use his employer’s payroll to subject the tips to income tax but not national insurance.  We were told to write to HMRC about each new case.  Whilst previously we received HMRC approval this year we have received no response and don’t know who to get in touch with as the SECO has moved post.  We have put one case through an Agent Account Manager and ended up receiving routine e-mails quoting E24 re Tips and Troncs and HMRC opening a PAYE specifically for the troncmaster (yet the AAM will not supply us with contact details of the person within HMRC they have been liaising with).  This case continues.  For a small hotel/bar the tips involved are not significant and the staff who take on the role of troncmaster to ensure the fair distribution of tips to the “whole team” for obvious reasons do not want a PAYE Scheme in their own name or indeed know how to operate it.  Any comments and advice on how to move this issue forward will be gladly received.  
  • It looks like there are two points here. First, whether a tronc can be dealt with through an employer’s payroll scheme or must have its own PAYE scheme, and, secondly, who to contact in HMRC to inform them about a tronc. 

    We recommend that anyone involved in troncs reads HMRC’s Booklet E24 at especially Help & Guidance on page 2 and Chapter 6 on page 5 which explains the troncmaster’s responsibilities and who can account for the PAYE on tronc payments.   

    Extract from E24 Chapter 6 Income Tax and troncs

    A tronc is run by an individual usually known as a troncmaster. Where the troncmaster is in control of the tips and responsible for sharing them amongst employees, the employer must tell us unless the arrangement came into existence before 6 April 2004. This is so we can identify the person responsible for PAYE in each period.

    We may check an arrangement exists to share tips amongst employees and that the troncmaster accepts that role. A PAYE scheme will be set up for the tips in the troncmaster’s name unless different PAYE arrangements need to be made.

    The troncmaster is personally responsible for all aspects of operating a PAYE scheme. He or she may be held responsible for any failure to deduct tax from payments from the tronc. Troncmasters who need help in understanding their PAYE responsibilities should contact us for advice.

    A troncmaster with a PAYE scheme may use the employer’s payroll to operate PAYE on his or her behalf (the employer effectively acting as a payroll agent), but the troncmaster’s PAYE records must be kept separate from the employer’s. The tronc PAYE scheme must be entirely independent of the employer’s scheme and must be run as such.

    On the basis of E24:

    1.         Regarding the payroll and accounting for PAYE:

    (a) The troncmaster is personally responsible for the PAYE on payments out of the tronc,

    (b) The tronc’s PAYE scheme can be run by the employer but the troncmaster remains personally responsible, and

    (c) If the employer is running the payroll for the tronc, the tronc’s and the employer’s records must be kept separate. 

    The requirement to keep the employer’s and the tronc’s records separate means that separate payroll schemes are needed, one for the tronc (which can be run by the employer as agent for the troncmaster) and one for normal salaries and wages (run by the employer for itself).

    2.         It is necessary for the employer to tell HMRC who the troncmaster is.  At the same time one can ask HMRC to set up a payroll for the tronc.  Page 2 of E24 provides the Employer Helpline telephone number to enable employers to contact HMRC. 


    Tax Faculty Team