Tronc – the high price of victory

Last Wednesday the hospitality industry recorded a victory over the tax man - a notable event and one worth celebrating.

At last one can say that HM Revenue & Customs (HMRC - formerly the Inland Revenue) has seen sense and clarified the way it interprets its rulings on tronc - the system for distributing tips among restaurant staff.

So the result is being hailed as a victory for restaurant businesses and good old-fashioned common sense.

The backtrack means that most restaurateurs were administering troncs properly before HMRC decided to target the sector through its now infamous Operation Gourmet.

While it is good news that HMRC has finally clarified the situation, it is, however, appalling that several restaurant businesses were driven to the wall by its demands for large sums of cash to cover backdated taxes.

Furthermore, while HMRC has reversed its guidelines, it won't compensate businesses that went bust as a result of its original demands. Admitting your mistakes is one thing; paying for them is another, it seems.

So what does it mean for restaurant businesses? Under the new guidelines, employers may now mention that a tronc exists without incurring national insurance charges. Restaurateurs can also give advice about the tronc to the troncmaster, and it can now be distributed through one payroll system.

Although this added clarity for those who run businesses is welcome, there has to be some concern that HMRC's decision to sanction the practice of topping up staff wages from the tronc to meet the national minimum wage will leave workers worse off.

It is for this reason that the retreat by HMRC could easily turn into a Pyrrhic victory.

Restaurant businesses must not see this ruling as an opportunity to pay their staff less. The industry must recognise the need to improve service, maintain standards and treat staff well with the aim of retaining them. This will not be accomplished by paying them as little as possible and topping up their salary with tips.

For its part, HMRC should consider compensating those that were forced into bankruptcy because of its erroneous judgements.

James Garner, managing editor, Caterer and Hotelkeeper

For more on tronc, go to www.caterersearch.com/tronc