Tronc Scheme for Restaurants, Pubs and Bars — Save Thousands on NIC While Staying Compliant
The new Tips Act changed everything. Here is how to distribute tips tax-efficiently, legally, and fairly — with help from chartered specialists who manage tronc schemes every day.
What Is a Tronc Scheme and Why Every Hospitality Business Needs One
A tronc is an independent system for collecting and distributing tips, gratuities, and service charges to staff. The word comes from the French tronc des pauvres, meaning a collection box for the poor.
When structured correctly with a genuinely independent troncmaster — someone who is not a director, owner, or senior manager — tips distributed through the tronc are exempt from both employer and employee National Insurance Contributions. This saves your business approximately 15% on every pound of tips distributed, while your staff take home more of their earnings.
The Employment (Allocation of Tips) Act 2023, which came into force in October 2024, has made proper tronc management more important than ever. The Act introduced strict new requirements for how tips must be handled, distributed, and recorded — with significant penalties for non-compliance.
Tips Act 2024 Requirements
100% pass-through — all qualifying tips, gratuities, and service charges must be distributed to workers in full
Written tipping policy — mandatory for all businesses where tips are received
Distribution deadline — tips must be paid to staff by the end of the month following receipt
3-year record keeping — full records of all tips received, allocated, and distributed
Fair and transparent allocation criteria that can withstand tribunal scrutiny
How Much Can Your Business Save With a Proper Tronc
The financial impact of a correctly structured tronc scheme is substantial. Here is a real-world example based on a mid-sized restaurant operation.
For a restaurant distributing £100,000 in tips annually
Setting Up a Tronc Scheme — Step by Step
A correctly structured tronc requires careful planning. Each step must be completed properly to maintain the NIC exemption and comply with the Tips Act.
Appoint an Independent Troncmaster
The troncmaster must be genuinely independent of the employer. They cannot be a director, owner, or senior manager with authority over hiring and firing. Typically a trusted senior staff member such as a head waiter or front-of-house lead. Their independence is what secures the NIC exemption.
Create a Written Tipping Policy
Now mandatory under the Tips Act. Your policy must explain how tips are collected, how the tronc operates, the allocation criteria, and how staff can request information about tip distribution. This document must be available to all staff and should be reviewed by someone with employment law expertise.
Set Up a Separate Tronc Bank Account
Tips collected must flow through a dedicated bank account, separate from your main business account. This creates a clear audit trail demonstrating that tronc funds are ring-fenced and managed independently of the employer's finances.
Establish Fair Allocation Criteria
The troncmaster determines how tips are shared, not the employer. Criteria might include role, hours worked, seniority, or a points-based system. Whatever the method, it must be transparent, fair, and documented — the Tips Act gives employees the right to challenge allocation at an employment tribunal.
Configure Separate Tronc Payroll
Tronc payments must be processed through a separate payroll scheme — not through your main PAYE. The troncmaster operates PAYE to deduct income tax only (no NIC). Running tronc through your main payroll system risks collapsing the NIC exemption entirely.
Register the Tronc Arrangement with HMRC
The troncmaster must register as an employer with HMRC for the separate tronc PAYE scheme. This formalises the arrangement and ensures RTI submissions are filed correctly for tronc payments alongside your main payroll reporting.
Implement Record-Keeping Systems
The Tips Act requires a minimum 3-year retention of all records relating to tips received, allocated, and distributed. This includes daily tip totals, allocation calculations, individual distributions, and any staff communications. Proper systems from day one prevent problems down the line.
Independence Is Everything
HMRC scrutinises whether the troncmaster's independence is genuine. Any employer influence over how tips are allocated — even informal suggestions — can collapse the NIC exemption and trigger back-dated NIC demands covering years of tronc payments.
Five Mistakes That Make HMRC Collapse Your Tronc
Getting a tronc wrong does not just lose you the NIC savings — HMRC can demand back-payments of employer NIC for every year the scheme was non-compliant.
Owner or Manager Acting as Troncmaster
If a director, owner, or senior manager with hiring and firing authority acts as troncmaster — or is seen to influence allocation decisions — HMRC will treat all tronc payments as ordinary wages subject to full NIC. This is the single most common reason tronc arrangements fail.
Running Tronc Through Your Main PAYE System
Tronc payments must be processed through a separate payroll scheme. If they run through your main PAYE alongside wages, HMRC will argue that the employer is controlling the payments and the NIC exemption does not apply. A separate PAYE registration for the tronc is essential.
No Written Tipping Policy
Since October 2024, a written tipping policy is a legal requirement under the Tips Act. Operating without one exposes you to employment tribunal claims from any affected worker, with fines of up to £5,135 per employee. It also raises red flags if HMRC reviews your tronc arrangement.
Inconsistent or Opaque Distribution
The Tips Act requires tip allocation to be fair and transparent. If your distribution method is unclear, inconsistent, or perceived as unfair, staff can challenge it at an employment tribunal. HMRC may also question whether the arrangement is genuinely independent if allocation appears arbitrary or employer-directed.
Failing to Keep Proper Records
The mandatory 3-year record retention requirement means every tip received, every allocation decision, and every distribution must be documented. Gaps in record-keeping not only breach the Tips Act but also make it much harder to defend your tronc arrangement if HMRC challenges it.
Emerging Risk: Tronc and Holiday Pay
The Palanki v Big Table Group tribunal case is testing whether tronc payments processed through PAYE systems attract holiday pay obligations. If the ruling goes against employers, it could add £10,000 or more per year to costs for businesses that have not structured their tronc correctly. Proper independent tronc structures are the best protection against this emerging risk.
We Set Up and Manage Your Tronc So You Do Not Have to Worry
From initial design through to ongoing payroll and compliance, we handle every aspect of your tronc scheme so it stays efficient and HMRC-proof.
Full Tronc Scheme Design
We design your tronc structure from scratch — allocation criteria, governance framework, troncmaster role definition, and operational procedures tailored to your specific business.
Troncmaster Guidance and Training
We help you appoint the right person and provide full guidance on their responsibilities, HMRC requirements, and how to maintain genuine independence throughout the arrangement.
Separate Tronc Payroll Processing
We run your tronc payroll completely separately from your main PAYE — operating tax deductions, issuing payslips, filing RTI submissions, and maintaining the separation HMRC requires.
Tips Act Compliant Policies
We draft your written tipping policy with a legal review through our integrated legal partners, ensuring it meets every requirement of the Tips Act and protects you against tribunal claims.
HMRC Registration and Compliance
We handle the HMRC registration for your tronc PAYE scheme and provide ongoing compliance monitoring so your arrangement stays robust against any future HMRC review.
Staff Communication Templates
We provide ready-to-use templates for communicating the tronc arrangement to your team — covering how it works, their rights under the Tips Act, and how to request allocation information.
We Do Not Just Set It Up — We Keep It Running
Most firms help you design a tronc and then leave you to manage it. We handle the ongoing payroll processing and compliance monitoring month after month, so your tronc stays HMRC-proof without adding to your workload.
Trusted by Restaurants, Pubs and Bars Across London
"LOYALS set up our tronc scheme and saved us over £8,000 in NIC in the first year. They handle all the payroll separately so we never have to worry about it. The whole process was smooth and well explained."
"We were worried about the new Tips Act and whether our existing tip arrangement was compliant. LOYALS reviewed everything, restructured our tronc properly, and drafted our written policy. Complete peace of mind."
"What I appreciate most is their availability. We had a question about our tronc on a Saturday and they responded within the hour. For hospitality businesses that operate weekends, that kind of support matters enormously."
Three Steps to a Compliant, Tax-Efficient Tronc
Whether you need a new tronc scheme or want your existing arrangement reviewed, the process is straightforward.
Book Your Free Tronc Review
We assess your current tip arrangements, identify NIC savings opportunities, and flag any compliance gaps — completely free of charge.
We Design and Implement
We build your tronc structure, draft your Tips Act compliant policy, set up the separate payroll, and handle HMRC registration. Typically operational within 2–4 weeks.
We Manage Ongoing Compliance
We process your tronc payroll every pay period, maintain records, monitor regulatory changes, and ensure your arrangement stays HMRC-proof month after month.
Book Your Free Tronc Scheme Review
Find out exactly how much your business could save. Free initial assessment with transparent pricing before any work begins.
Available evenings and weekends — because hospitality never stops.
Your Tronc Scheme Questions Answered
A tronc is an independent arrangement for collecting and distributing tips, gratuities, and service charges to staff. When managed by a genuinely independent troncmaster — someone who is not a director or owner — tips paid through the tronc are exempt from both employer and employee National Insurance Contributions. The term comes from the French tronc des pauvres, meaning a collection box for the poor. Properly structured, a tronc saves your business approximately 15% on every pound of tips while your staff take home more of their earnings.
A troncmaster must be genuinely independent of the employer. Directors, owners, and senior managers with hiring or firing authority cannot act as troncmaster. Typically, a trusted senior member of staff — such as a head waiter, front-of-house lead, or experienced supervisor — is appointed. The critical requirement is that the employer does not influence or control how tips are allocated. This independence is what secures the NIC exemption, and HMRC will scrutinise it closely if they review your arrangement.
Employees still pay income tax on tronc tips because they are taxable earnings. However, they do not pay employee National Insurance Contributions on tips distributed through a properly structured tronc. The troncmaster operates PAYE on tronc payments to deduct income tax, but NIC is not applied. This means employees take home a larger proportion of their tips compared to tips that are processed as ordinary wages through the employer's main payroll.
No. When tips are distributed through a correctly structured tronc with a genuinely independent troncmaster, employers do not pay National Insurance Contributions on those amounts. At the current employer NIC rate of 15%, the savings are substantial. A restaurant distributing £100,000 in tips annually saves approximately £15,000 in employer NIC through a proper tronc. The key requirement is that the troncmaster independently controls allocation without employer interference.
The Employment (Allocation of Tips) Act 2023, which came into force in October 2024, requires employers to pass 100% of all qualifying tips, gratuities, and service charges to workers. You must maintain a written tipping policy available to all staff, distribute tips by the end of the month following receipt, keep complete records for a minimum of 3 years, and ensure allocation is fair and transparent. Employees can request tip records and challenge allocation at employment tribunals. Non-compliance penalties can reach £5,135 per affected employee.
Yes, service charges can be distributed through a tronc scheme provided the employer does not exercise control over how they are allocated among staff. If the employer dictates the distribution of service charges, those payments are treated as employer-directed and will attract NIC. The service charge must be genuinely passed into the tronc pool for the troncmaster to allocate independently using the agreed criteria. Proper structuring of service charge flows is something we handle as part of our tronc setup service.
If HMRC determines that your tronc arrangement is not genuinely independent, they can reclassify all tronc payments as standard earnings. This means you would owe back-dated employer NIC on every tip distributed through the arrangement, plus interest and potential penalties. HMRC typically looks back 4–6 years, so the financial exposure can be substantial. Professional setup and ongoing compliance monitoring are the best protection. If you are facing an HMRC enquiry, we provide full defence support including integrated legal representation.
We offer a free initial tronc review to assess your current arrangements and calculate your potential savings. Setup fees depend on the size and complexity of your operation, but in virtually every case the NIC savings achieved in the first year alone far exceed professional fees. We provide clear, transparent pricing before any work begins so there are no surprises. Ongoing tronc payroll management is available as a monthly service.
Yes. We provide full tronc payroll processing as a dedicated service alongside your main payroll. This includes operating PAYE on tronc distributions to deduct income tax, issuing payslips to staff, filing RTI submissions to HMRC, and maintaining all required records. Running tronc payroll separately from your main PAYE is essential for maintaining the NIC exemption, and outsourcing it to us ensures it is handled correctly every single pay period without adding any burden to your team.
A straightforward tronc scheme can typically be designed, documented, and fully operational within 2–4 weeks. This includes drafting your written tipping policy, establishing the tronc bank account, configuring separate payroll, registering with HMRC, and communicating the arrangement to your staff. More complex operations with multiple venues or existing arrangements that need restructuring may take slightly longer. Our priority is always to have your tronc saving you money as quickly as possible.