West Midlands restaurateurs need to be very careful when it comes to paying tax on tips and gratuities, Simon Littlejohns, partner at accountants PKF in Birmingham has warned.
"When I receive good service in a local restaurant, I normally leave a tip by way of a thank you to the staff. Unfortunately, when I leave the tip, I almost feel like saying 'make sure you get the tax treatment of my tip right! I don't want you to get into trouble with the taxman'!
"Sadly, my experience suggests that trouble can be only just around the corner," said Mr Littlejohns.
The Inland Revenue has always kept a close eye on restaurants and their staff.
"For some reason, the taxman seems to be paranoid that hundreds of restaurateurs, waiters and waitresses are defrauding the Chancellor - so the Inland Revenue cracks down with a vengeance whenever possible.
"Indeed, the Inland Revenue has been very hard-nosed in this area, interpreting the law in a strict and very hardhitting way," said Mr Littlejohns.
The Inland Revenue's long running attack on the restaurant trade even has a name - "Operation Gourmet".
It has resulted in a large number of restaurants being penalised for contravening tax regulations, primarily on the grounds that the restaurant has been interfering with distribution of "the tronc".
Tronc schemes are the system used to distribute tips and gratuities from customers to staff and are a key part of the pay and reward system within restaurants and hotels.
The Inland Revenue's attack has resulted in many restaurateurs being forced to pay National Insurance contributions on the amounts paid out to staff, often going back over the last six years. This can add up to a tidy sum, certainly enough to cripple the cash flow of some restaurants.
Understandably, industry representatives are fighting back, which has led to the Inland Revenue clarifying some aspects of the guidance on tips, gratuities and voluntary service charges that was first published back in February 2004.
The regulations are still very complex but the revised Inland Revenue guidance could be good news for restaurateurs.
Mr Littlejohns said: "The newly-issued guidance is widely viewed by the industry, and by accountants such as PKF who specialise in this area, as a climbdown by the Inland Revenue.
" Businesses previously affected by the Inland Revenue's hard-hitting approach could be able to claim back what is, in effect, overpaid National Insurance. This may cost the Chancellor millions of pounds. The rebates could end up totalling more than £10 million.
"I recommend that restaurateurs forced by the Inland Revenue to pay over additional National Insurance on tips and gratuities take advice. There may be scope to renegotiate their previous fines and claim a refund on any potential overpaid National Insurance.
"If a restaurateur is currently experiencing ongoing Inland Revenue inquiries in this area, or if they feel they may have overpaid National Insurance and could be due a refund, they shouldn't simply sit back and take it. Commonsense says fight your corner! After all, it is your cash."