The Hidden Risks when Declaring Tips

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A recent case in Glasgow has brought to light the little known danger surrounding the law relating to declaration of tips encountered during the course of employment.

The main issue is that should one fail to declare all the tips received then you will be at risk of losing out on even the most basic of employment rights.

This follows the case where former manager of Coia’s café in Glasgow had his claim of unfair dismissal thrown out by the court because he and his employer had an agreement whereby not all tips would be declared to Her Majesty’s Revenue and Customs (HMRC). After this emerged the case was dismissed as being “tainted by illegality”.

The ruling must serve as a warning to those working in the hospitality industry where flexible arrangements relating to gratuity are considered the norm. The Chairman of the Glasgow Restaurant association commented: “I’m really surprised to hear this, it is certainly nothing that I’ve been aware of. Generally most restaurants nowadays are following the HMRC guidelines on it – tips are collected and put through the payroll. Taking tips without declaring them is a lot less common than it used to be. People in the industry will have to look at their process and change them accordingly to ensure that everyone is protected.”

Employment lawyer, Brian Napier QC, explained to The Herald the risk being taken: “People perhaps take a more lenient view of workers not declaring tips, it’s still tax evasion. People who are working illegally might be presented with an argument that they cannot proceed with any claim they may try to make under employment legislation.”

While the issue is not new Mr Napier warned that many people are still not aware of the risk with the sad reality that “The people who lose out are usually the ones who’ve got very little”.

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