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Hospitality Accounting- Things You Need to Know


Do you ever wonder about the difference between Tips, Gratuities, and Service charges? To the public these are collectively known as ‘Tips’. However, it is important that you understand the difference between them, and how they are taxed or not taxed.

A tronc is a separate organised pay arrangement sometimes used to distribute tips, gratuities and service charges given by customers. A tronc scheme, managed by a troncmaster, is a way to ensure businesses are compliant with the Employment (Allocation of Tips) Bill which came into force in January 2023. The bill focuses on fairness of tip allocations. It requires hospitality businesses to ‘fairly’ allocate 100% of tips to workers no later than the end of the month following the month in which the tips were paid by customers.

 We discuss Tronc schemes in more detail here


This is the most common type of tip and is “left on the table in cash”, for an individual representing their appreciation for the good service they have provided. That individual member of staff will go home with a little bit of extra cash to top up their minimum wage income.


Tips stands for “To Insure Prompt Service”, and is usually a sum of money paid to an individual in hospitality, in advance of a good service. One story I heard revolved around a customer ripping a $50 note in half upon arrival at a hotel in the Caribbean, informing the waiter, “if you look after me during this visit, I will hand you the other half before I leave”. The guest received excellent service during their holiday and the member of staff received a generous tip of $50.

Service Charges

A service charge is a percentage added to the bill to cover service; a predetermined gratuity you could say. It can be mandatory or discretionary. It is mandatory if the customer has no choice but to pay it, and discretionary when the customer can choose to remove it from the bill. It can be any amount set by the pub or restaurant but is typically around 12-15% of the total bill.

If the service charge is mandatory, then, unlike tips or gratuities, this will be classified as part of the business revenue for tax purposes and will be subject to standard rate VAT if applicable. All other tips, gratuities, and discretionary service charges fall outside of the scope for VAT.

HMRC- what’s their view on tips?

From now on we will collectively refer to gratuities, tips and discretionary service charge as “Tips”

Tips are outside the scope of VAT when genuinely freely given. A Tip left on the table or paid up-front to an individual doesn’t go through their payroll so they haven’t been taxed through the PAYE scheme and no National Insurance contributions will be due. As taxpayers, they should inform HMRC of this extra income, usually via their Self-Assessment tax return.

You may think that ‘how, why, and when they are taxed’ isn’t your problem and has nothing to do with you as the business owner. Certainly, in this simple example that is correct, and collecting taxes for HMRC in this example isn’t your responsibility. Everyone’s happy, apart from the chef who prepared the meal, or the bar manager who cleans the beer lines and orders the wine, and every other member of your team that has something to do with the customers experience but hasn’t received any tips!

Payroll for the hospitality industry

In hospitality, however, it is more common to pool the tips so that they can be distributed amongst all staff whether they are customer facing (front of house) or in the Kitchen (back of house). When the tips are distributed this way, it’s a whole different ball game. It now depends on how the tips are shared, and by whom, that will determine how they will be treated by HMRC.

That is why it is important to talk to experienced hospitality accounting, payroll and taxation experts like Carroll Accountants, to ensure you are following the correct procedures.

Do you ever wonder about the difference between Tips, Gratuities, and Service charges? From a hospitality accounting and taxation point of view they need to be treated differently. Read here for more advice.


The Importance of Financial Planning for Small Hospitality Businesses

Small hospitality businesses face unique financial challenges, such as fluctuating revenue, seasonal demand, and rising operating costs. In this environment, financial planning is critical to achieving long-term success.

By taking a proactive approach to financial management, small businesses can ensure they have the resources and resilience to weather any challenges they may face.

In this article, we'll explore why financial planning is so important for small hospitality businesses and provide practical tips on how to create a financial plan that works for you.

1. Plan for Growth

Financial planning is essential for small hospitality businesses looking to grow and expand their operations. By forecasting revenue and expenses, businesses can identify opportunities to invest in new equipment, expand their workforce, or open new locations. This can help businesses take advantage of emerging trends and capitalize on new market opportunities.

2. Manage Cash Flow

Cash flow management is critical for small businesses in the hospitality industry. By forecasting cash inflows and outflows, businesses can ensure they have enough liquidity to meet their ongoing expenses and investments. This can help prevent cash shortages that can lead to missed opportunities, late payments, and financial distress.

3. Identify Risks and Opportunities

Financial planning helps businesses identify potential risks and opportunities. By conducting a thorough risk assessment, businesses can identify potential threats to their revenue and take steps to mitigate them. Similarly, by conducting market research and staying up-to-date on industry trends, businesses can identify new opportunities and capitalize on them before competitors.

 4. Measure Performance

Financial planning provides a framework for measuring business performance. By setting financial goals and tracking progress against them, businesses can identify areas where they're performing well and areas where they need to improve. This can help businesses make data-driven decisions and improve their overall performance.

 5. Optimize Tax Planning

Effective tax planning is critical for small hospitality businesses looking to maximize profits. By working with a qualified accountant, businesses can identify tax-saving opportunities and take advantage of them. This can help businesses reduce their tax liability and reinvest the savings back into the business.

In conclusion, financial planning is critical for small hospitality businesses looking to achieve long-term success. By taking a proactive approach to financial management, businesses can plan for growth, manage cash flow, identify risks and opportunities, measure performance, and optimize tax planning. At Carroll Accountants, we offer a range of financial planning and accounting services to help small businesses in the hospitality industry achieve their financial goals. Contact us today to learn more about how we can help your business thrive.


Tips To Follow After Root Canal Treatment

When a tooth is damaged due to decay or infection, a root canal treatment may be done to save the tooth. The root canal treatment can be completed in a single visit or may require multiple visits to the dentist.

As a part of the procedure, local anesthesia is given to the patient to numb the infected tooth. Then, a rubber dam is placed to isolate the tooth and prevent contamination. Next, the canal or canals are accessed through a hole made on the top of the tooth so that the canals can be thoroughly cleaned, and filled. The hole is then sealed with a filling. The procedure does not affect tooth functionality and preserves the natural tooth. Ensure to follow your doctor’s instructions to maintain optimum oral health after a root canal.
Following are tips to follow after root canal treatment.

Take medicines as directed:

You have already experienced the agony of an infected tooth. Therefore, take medication as directed by your dentist to avoid any further complications.

Assess your pain levels:

The sharp pain and discomfort you may feel after a root canal treatment usually goes away in a few days. However, if your pain does not go away and is not getting milder, contact your dentist for advice.

Keep the infected area clean:

Cleanliness is primary to the healing of a root canal, ensure that the tooth and gums surrounding the infected area stay clean all the time. Brush and floss your teeth daily to help maintain proper oral hygiene.

Do not put pressure on the infected tooth:

The newly root canaled tooth may be tender for the first few days, so avoid putting excess pressure while grinding or chewing food. Try using a night guard to protect your teeth during sleep. While eating, try not to chew food from the side where you recently had a root canal.

Follow a soft diet:

After undergoing a root canal treatment avoid consuming any food that is hard to chew, crunchy or crispy. Follow a soft diet for a few days while the tissues around your tooth heal.

Opt for root canal treatment only after proper diagnosis and consultation with a dentist. Expressions Dental™ Clinic offers Root Canal Treatment to residents of Calgary and surrounding areas. When you visit our clinic, we will assess, diagnose and give you treatment options to relieve your dental problem.


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