In many restaurants and bars a system of “tronc tips” operates in which all service charges and tips which are received by an employer are then paid to a troncmaster who distributes the money amongst the staff. The tribunal was asked to consider if the monies received in tronc schemes at several London restaurants and clubs were to count as remuneration for the purposes of the National Minimum Wage Regulations 1999.

In each of the restaurants and clubs concerned the bar and waiting staff were paid below the minimum wage without the tronc money. The tribunal found that the troncmaster simply distributed the employer’s money, and therefore such tips could count towards the minimum wage.

HMRC appealed against the tribunal’s decision and brought the matter before the EAT. The EAT found that the tribunal had erred in finding that tronc money belonged to the employer and could form part of an employee’s salary for the purposes of the national minimum wage. The EAT found that the employer had no power over the money once it was passed to the troncmaster and that at that point it no longer owned the money. The money did not pass from the employer to the employees and it could not therefore be counted as remuneration.

Commissioners for Her Majesty’s Revenue and Customs v Annabels (Berkeley Square) Ltd and ors, EAT