Concept · article 11 of 24

Recording tips:
when they count as revenue.

Pass-through tips vs service-charge tips. Which line each one belongs on, with examples.

Ibrahim Ölmez Ibrahim ÖlmezFounder · nouz · 5 min read · Updated this week
The rule. If the tip goes straight to a staff member, it's not your revenue. If it goes through your bank and you pay it out as wages, it is.

Tips are one of those things that look simple but get tax-complicated fast. nouz handles them by category — pass-through cash tips don't enter your books at all, while service-charge tips that go through your account count as revenue with a matching staff expense.

01 Two kinds of tips

  • Pass-through tips — cash in the jar, given to staff at close. Never touches your bank.
  • Service-charge tips — added to the card payment, deposited to your account, then paid out as additional wages.

Tax law treats these differently. nouz should reflect that.

02 Pass-through tips

Don't log these. They're not your money — they're the staff member's, going through your shop for ten minutes on the way to their pocket. The till total you log as cash revenue should already exclude the tips that went into the jar.

In practice: when you count out the till at close, set aside the tip jar contents before computing your gross. The gross figure you type into nouz is the post-tip-removal number — what's yours.

03 Service-charge tips

These count as revenue — and the wages you pay out from them count as a Staff extra hours expense. Two entries:

  • Log the tip as part of card revenue — typically already included in the day's card total from your acquirer.
  • Log the payout as Staff extra hours — on the day you pay it out (usually the same week).

Net effect on EBIT: roughly zero (revenue + same expense = wash), which matches reality. Your accountant will recognise this pattern.

04 Check with your accountant

Talk to your accountant. Tax treatment of tips varies a lot by jurisdiction. The above is the common pattern, not legal advice. Get your accountant to confirm what works for your country.

In particular: whether VAT applies to tips, whether they're subject to payroll tax when paid out, whether you need to track tips per-employee for tax reporting — all jurisdiction-specific. nouz is for daily P&L tracking, not tax compliance.

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