What is a tronc? Troncmasters, the tips law and payroll in Great Britain

The short version

• A tronc is a pooling arrangement. HMRC calls it “a special pay arrangement used to distribute tips, gratuities and service charges”. The troncmaster is “the person, other than the employer, responsible for arrangements to share tips among employees”.
• The tips law lets you use one. Under section 27F of the Employment Rights Act 1996, if you use an independent tronc operator and it is fair to do so, you are treated as having allocated the tips fairly. The Code adds that you must act if you later find the tronc is unfair.
• Payroll depends on who decides the split. If you are involved in deciding the distribution, HMRC says you run PAYE, and if you decide, directly or indirectly, who gets what amount, National Insurance is due. If an independent troncmaster decides, the troncmaster runs a separate PAYE scheme and, on HMRC’s examples, National Insurance is not due.
• You must tell HMRC about a tronc where the troncmaster controls the tips, unless it began before 6 April 2004.
• Records still count. Your tips record must show what you arranged to be allocated by the tronc operator.

This guide covers Great Britain. The 2023 Act extends to England and Wales and Scotland only. It is general information, not tax or legal advice: ask your accountant before you set one up.

What a tronc and a troncmaster are

Two official sources define the words, and they agree.

HMRC’s manual says it accepts that a tronc exists for tax purposes only where there is “an organised arrangement and a person who accepts that they are the troncmaster”. If there is any doubt, PAYE responsibility “for amounts which pass through their hands” stays with the employer.

Who can be the troncmaster

The Code says an employer can directly appoint a member of staff, who can then act as an independent tronc operator. An independent operator can also be an external payroll or accountancy firm, or a member of staff the workers elect or agree on. It warns: “Care is needed to maintain independence.”

HMRC adds one important limit. If the employer, a business partner or an official of a company (for example a director) acts as troncmaster, they are “considered to be making payments as if they were the employer”. The payments go through the employer’s payroll, and the employer is responsible for PAYE.

How a tronc fits the tips law

The Act’s duties are in sections 27C to 27J of the Employment Rights Act 1996 (enforcement and the Code are in sections 27K onwards). Three points matter for a tronc.

1. The tips are still qualifying tips. Section 27C covers tips the employer receives, however they are later shared. The Code says the method of payment does not decide it, and that an employer is “likely to receive” a tip paid by card or through an app, which makes it an employer-received tip.
2. An independent tronc operator can discharge the fair-allocation duty. Section 27F(2) says that if you arrange for the tips to be allocated by an independent tronc operator, and it is fair for you to make those arrangements, you are treated as having ensured a fair allocation. Regard must be had to the Code in deciding whether it is fair. The same applies to part of the tips (section 27F(3)).
3. ”Independent” has a statutory meaning. Section 27F(6) says an independent tronc operator is a person you reasonably consider to be operating independently of you, who allocates the tips between your workers at the place of business, and under whose arrangements workers’ payments are free of unauthorised deductions. It also requires that payments to workers are ones to which the National Insurance disregard for gratuities applies, by meeting the condition that the employer “does not allocate the payment, directly or indirectly, to the earner”. In plain terms: if you, in effect, decide who gets what, it is not an independent tronc for the Act.

The Code (paragraphs 31 and 32) then says:

• If you set the tronc’s instructions in line with fairness and reasonably believe it is operating independently and fairly, you are regarded as having complied with the Code.
• If you later become aware of the operator acting “in an unfair or improper manner”, you are obliged to act. The Code lists three options: instruct the operator to change, replace the operator, or end the arrangement. If you do not act, you can be regarded as having failed to comply and can face enforcement through an employment tribunal.

The pay-out deadline in section 27G is the end of the month after the month the customer paid. The section places the duty on the employer. We could not confirm from the sources we read how HMRC or the courts apply it to money paid out by a tronc operator, so treat the same date as your target and ask the operator to work to it.

PAYE and National Insurance

All of this is HMRC’s guidance on tips, gratuities, service charges and troncs, last updated on GOV.UK on 18 July 2025. It says the 2024 tips law “does not change how these payments should be assessed for tax and National Insurance contributions”.

The detail behind the table:

• The troncmaster’s own PAYE scheme. HMRC says a PAYE scheme “must be set up for the tips in the troncmaster’s name unless different PAYE arrangements need to be made”. The troncmaster “is personally responsible for all aspects of operating a PAYE scheme” and may be held responsible for a failure to deduct tax. The troncmaster may use the employer’s payroll software, but the records “must be kept separate from the employer’s”.
• Telling HMRC. The legal source is regulation 100 of the Income Tax (Pay As You Earn) Regulations 2003. Where an organised arrangement exists for tips to be shared by someone who is not the principal employer, the principal employer “must notify” HMRC, giving the troncmaster’s name if known. The duty does not apply to arrangements that began before 6 April 2004. HMRC’s guide (example 3) says to tell “the HMRC office who deals with the PAYE” for the business, but the pages we read do not name a form or online channel.
• When the employer keeps the PAYE job. HMRC says the employer is responsible where it is involved in deciding the distribution, or where mandatory service charges are distributed through the tronc. That applies “even if responsibility for making distributions to staff is delegated to a trusted employee”.
• National Insurance in the law. Paragraph 5 of Part 10 of Schedule 3 to the Social Security (Contributions) Regulations 2001 disregards a payment “of, or in respect of, a gratuity” if either the employer does not pay it (and it is not money previously paid to the employer), or the employer “does not allocate the payment, directly or indirectly” (with exceptions for some payments by connected persons and by trustees). HMRC’s view is that in “most cases where you pass tips to an employee” neither is met. Paragraph 5(4)(b) mentions a person acting “in his capacity as a tronc-master”.
• Mandatory service charges. HMRC says if you impose one and pay it out to employees, National Insurance is “always due on the payments”, however it is shared. HMRC accepts a service charge as voluntary if it is clearly presented to the customer as entirely optional.
• Who pays any National Insurance. Where a tronc payment attracts it, “the troncmaster is not required to pay National Insurance contributions on those payments”. Responsibility for calculating and paying it “rests with the employer”.

HMRC’s examples are fact-specific, and it says to contact HMRC if you are unsure. Example 13 covers an employer who tops up a guaranteed minimum: the top-up is a contractual payment and attracts National Insurance.

Where card tips go

Card tips and service charges are usually paid to the business, so they land in your account first. If you use an independent troncmaster, the usual route is:

1. The customer pays; the money is yours to hold, or goes under a payment arrangement to another person (section 27C(3)).
2. You pass the pool, in full, to the troncmaster by the agreed date. Section 27F(6) requires that the operator makes no unauthorised deductions.
3. The troncmaster allocates it using the written factors, and pays the workers through the troncmaster’s own PAYE scheme.
4. You record the total received and the amount you arranged to be allocated by the operator.

HMRC’s example 15 is the opposite case: a company receives all tips, devises its own method and has no independent troncmaster. National Insurance and tax are due, through PAYE, because the company is “effectively deciding on how the tips are to be allocated”.

What to record

Section 27J requires a record where qualifying tips are paid more than occasionally. It must show the amount paid at your place of business and the amount you allocated to workers, and the amount you “arranged to be allocated to workers ... by an independent tronc operator”. Keep it for three years from the date each tip was paid. A worker can ask for the same figures once every three months, as the main tipping guide explains.

Our suggestion, not a legal list: also keep the date you passed each pool to the operator, the operator’s allocation schedule, the troncmaster’s name and the date you told HMRC.

A worked example (illustrative only)

A café’s customers paid £1,500 of voluntary card tips in October 2026. It uses an independent payroll firm as troncmaster. The firm decides for itself to share the pool by hours worked, and the café’s tipping policy records that method.

What the café records: £1,500 received in October, the date it passed all £1,500 to the troncmaster, and that the troncmaster allocated it. What the troncmaster does: runs PAYE on the three payments under its own scheme. If the café had instead required the firm to use the café’s own method, such as a points system, HMRC’s example 11 says National Insurance would be due, and the firm may then not count as an independent tronc operator under section 27F(6). The figures show the flow only: they are not a tax calculation, and a mandatory service charge would be treated differently.

What we could not confirm

• How the one-month deadline applies to a tronc. Section 27G refers to the employer’s allocation and payment. We found no guidance applying it to money paid out by an independent operator.
• How to notify HMRC. Regulation 100 requires it, and HMRC’s example 3 says to tell the office that deals with the business’s PAYE, but the pages we read do not name a form or online channel.
• Mixed arrangements. Tronc plus employer top-ups, tronc plus mandatory service charge, or a tronc that covers only part of the tips are not settled by the pages we read beyond HMRC’s examples.
• Northern Ireland. The 2023 Act extends to England and Wales and Scotland. We did not check any Northern Ireland tipping rules.
• What may be in the revised Code. The government’s revised draft was put out for consultation (19 August to 29 September 2026, now closed, outcome not yet published). It is not law.

Sources

Last checked 28 October 2026. Dates are when a page says it was last updated, where it gives one.

• Guidance on tips, gratuities, service charges and troncs, HMRC on GOV.UK (18 July 2025)
• Code of practice on fair and transparent distribution of tips, GOV.UK (29 July 2024)
• Employment Rights Act 1996, section 27C, 27D, 27F, 27G, 27I and 27J, legislation.gov.uk (current)
• Employment (Allocation of Tips) Act 2023, section 13 (extent), legislation.gov.uk
• Income Tax (Pay As You Earn) Regulations 2003, regulation 100, legislation.gov.uk
• Social Security (Contributions) Regulations 2001, Schedule 3, legislation.gov.uk (Part 10, paragraph 5: gratuities and offerings)
• PAYE20160: TRONC scheme, HMRC PAYE manual (22 April 2026)
• Employment Rights Act 2025, section 14, legislation.gov.uk (marked prospective on 28 October 2026)
• Distributing tips fairly: revised statutory code of practice (29 July 2026) and Make Work Pay: revised tipping code of practice (consultation) (19 August 2026; closed 29 September 2026), GOV.UK

Changes to this guide

• 28 October 2026: Draft written and checked.

This guide is general information written from the official sources listed above and checked on 28 October 2026. It is not legal, tax or financial advice, and Plainfiles is not endorsed by any government body. Rules change, so check the linked official pages for your own situation. Written and designed by Plainfiles with the help of artificial intelligence (AI) tools, then checked against the official legislation and guidance listed in the sources. How we write and check our guides.