Chapter NIM02915
Published date | 11 April 2016 |
Record Number | NIM02915 |
It is common practice within the restaurant industry for businesses to add a service charge to a customer’s bill.
Example | ||
Customer’s bill for meal | £100 | |
Service charge @ 10% | £ 10 | |
Total amount payable | £110 |
Where a service charge is compulsory, the customer is obliged to pay. The amounts paid by customers for compulsory service charges are not gratuities or offerings and cannot be disregarded from earnings when calculating Class 1 NICs. It is unnecessary to consider whether either condition 1 or 2 of the gratuity disregard (NIM02905) is satisfied.
Donor or customer voluntarily pays more than the compulsory service chargeWhere a donor or customer voluntarily pays more than the compulsory service charge, the amounts paid over and above the service charge are gratuities.
Example | ||
Customer’s bill for meal | £100 | |
Service charge @ 10% | £ 10 | |
Total amount payable | £110 | |
Customer pays another £5 for the service provided |
In this example, if either condition 1 or 2 of the gratuity disregard (NIM02905) is satisfied, the extra £5 paid by the customers for gratuities can be disregarded from earnings when calculating Class 1 NICs liability.
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Voluntary or discretionary service chargesIt is common practice in restaurants for voluntary or discretionary service charges to be added to customers’ bills. If a customer is not obliged to pay the service charge, the amount paid for the service charge is a gratuity.
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