FOR hundreds of waiters, hairdressers and hotel staff in cities like York which have a strong service sector, here's a tip on tips: Relaxed tax laws now say that you can keep more of those gratuities.

Most of staff who receive tips should benefit from a ruling by the Inland Revenue on how gratuities are taxed says ACCA, the Association of Chartered Certified Accountants.

The new guidelines state that tips received by staff in a so-called tronc or staff pot organised and distributed by other staff members, will no longer be liable for National Insurance Contributions (NIC).

On the other hand, if there is a contract between the employer and employee which says that tips will be used to making up money to the level of minimum wage, then the new rules do not apply.

It also might not count if the employer is the one who organises the tronc.

Jonathan Beckerlegge, ACCA spokesman for York and the North East, said: "Previously, the Inland Revenue insisted that NICs were paid on all tips.

"This new ruling means that NIC will only be payable on money collected within a tronc that is used to top up an employee's salary to the national minimum wage level, or in cases where the employer is in some way involved in their allocation.

"Many service industry businesses in the past have been investigated by the Inland Revenue and had to pay significant penalties for not paying the correct amount of NICs.

"This U-turn could provide scope for some restaurants, hotels or hairdressers to renegotiate their previous fines."

Following discussions with industry experts, the Inland Revenue has now published a revised booklet E24 Tips, Gratuities, Service Charges And Troncs.

The booklet covers the treatment of tips and service charges for income tax, national insurance contributions and VAT as well as dealing with the implications of the national minimum wage legislation.

Mr Beckerlegge said: "The rules are complicated and professional advice is always advisable to avoid the pitfalls."

Updated: 11:23 Friday, April 29, 2005