card-tip-deduction-check

---
name: card-tip-deduction-check
description: Checks a payment processor statement against what actually reached workers in tips, and names every deduction that should not be there, because UK law counts the full amount a customer paid as the qualifying tip before any card fee, merchant service charge or administration cut is taken off. It does not estimate a reasonable processing cost to allow, because the law does not allow one: the test is whether the gross amount customers left matches what workers were paid. Use before you set up a card tipping system, when a processor's statement shows a fee line next to tips, or when a worker asks why their card tips were less than the amount on the receipt.
---

# The card tip deduction that should not exist

You give this the processor statement for the period and the amount actually allocated to workers for the same tips. You get back a line by line match, every gap named as a deduction, and the two sentences of law that make the gap unlawful rather than a cost of doing business.

## What it does

1. **Starts from the rule that the gross amount is the tip, not the net.** Section 27C(6) of the Employment Rights Act 1996, as inserted by the Employment (Allocation of Tips) Act 2023, states that deductions made by the employer or anyone else "are disregarded when working out the amount the customer paid." A card fee taken by the processor before the money reaches the business does not shrink the qualifying tip; the qualifying tip is still the figure the customer's card was charged.
2. **Checks against the government's own model policy, not a general impression of fairness.** The Department for Business and Trade's non-statutory guidance for employers publishes a template tipping policy in which the employer states it "ensures that 100% of tips received via card payment are distributed to workers." That is the baseline this skill measures a real statement against: anything less than 100% is a shortfall to explain, not a rounding difference to wave through.
3. **Separates a lawful deduction from an unlawful one using the Code's own wording.** The statutory Code states at paragraph 2a that employers must "pass on all tips and service charges to workers without deductions, except in very limited scenarios," and the only scenario named across the Act and the guidance read for this pack is the tax and National Insurance due on the worker's pay. A card processing fee, a bank charge, an "admin fee" line, or a float top-up taken from the tip pool is not on that list.
4. **Treats cash and card tips differently, because the law does.** The same government template states "all cash tips are the property of the workers who receive them from customers," with no employer handling at all; card tips are different because the employer receives the money first and must then pass it on in full, which is exactly the point at which a deduction can be quietly inserted.
5. **Flags a mandatory service charge as a different question.** Where the charge on the bill is not a tip but a mandatory service charge, HMRC guidance states National Insurance contributions "are always due on the payments," regardless of how the money is shared between staff, so a fee or a tax line on that charge is not evidence of the same unlawful deduction this skill is built to catch.

## Then it checks

1. The processor statement's gross card tip total for the period is identified and recorded before any fee line is subtracted.
2. The amount actually allocated to workers for the same period is compared against that gross total.
3. Any shortfall is named: processing fee, admin fee, float adjustment, or unexplained.
4. Only income tax and National Insurance appear as lawful reductions between the gross tip and the amount paid to the worker.
5. Cash tips in the same period are confirmed as held by workers directly, with no employer deduction applied to them either.

Any check fails: name it, redo that step once. Failed twice: say what is wrong and stop.

## Rules
- Public information only. Never invent a fact, a number or a quote.
- Anything sent in someone's name says whose name it is.
- Never accept "card processing cost" as a lawful deduction from a qualifying tip; no source read for this pack permits it.
- Never net off a shortfall against a different period's tips to make a check pass.
- This is a working document for the owner to check against their own processor statement and for their accountant or solicitor to check the tax treatment. It is not legal advice.

## Built from
- Employment Rights Act 1996, Part 2B, section 27C, as inserted by the Employment (Allocation of Tips) Act 2023 c.13, https://www.legislation.gov.uk/ukpga/2023/13, Royal Assent 2 May 2023, read 4 November 2026: the gross-amount rule behind step 1.
- Department for Business and Trade, "Distributing tips fairly: non-statutory guidance for employers", https://www.gov.uk/government/publications/distributing-tips-fairly-non-statutory-guidance-for-employers/distributing-tips-fairly-non-statutory-guidance-for-employers, read 4 November 2026: the 100% card tip template clause and the cash tip ownership clause, behind steps 2 and 4.
- Department for Business and Trade, "Code of Practice on Fair and Transparent Distribution of Tips", https://www.gov.uk/government/publications/distributing-tips-fairly-statutory-code-of-practice/code-of-practice-on-fair-and-transparent-distribution-of-tips-html-version, published 29 July 2024, in force 1 October 2024, read 4 November 2026: paragraph 2a on permitted deductions, behind step 3.
- HM Revenue and Customs, "Guidance on tips, gratuities, service charges and troncs" (E24), https://www.gov.uk/government/publications/e24-tips-gratuities-service-charges-and-troncs/guidance-on-tips-gratuities-service-charges-and-troncs, read 4 November 2026: the mandatory service charge NI rule, behind step 5.

# card-tip-deduction-check

## You are given
The payment processor's statement for the period, with every fee line shown exactly as the processor wrote it. The amount actually allocated or paid to workers as card tips for the same period. The income tax and National Insurance figures already applied to those tip payments, if any. Any cash tip total for the same period and confirmation of how it was handled (kept by workers directly, or passed through the business).

## Produce
Write into a `./card-tip-deduction-check-output/` folder:

1. `statement-ledger.csv` with columns: `row_ref`, `transaction_date`, `gross_card_tip_gbp`, `fee_line_description_verbatim`, `fee_amount_gbp`, `net_after_fee_gbp`. `row_ref` is C0001 upward. Every fee line on the statement gets its own row, copied verbatim.
2. `worker-payment-match.csv` with columns: `row_ref`, `gross_card_tip_gbp`, `amount_paid_to_workers_gbp`, `shortfall_gbp`, `tax_and_ni_accounted_gbp`, `unexplained_shortfall_gbp`, `verdict`. `unexplained_shortfall_gbp` is `shortfall_gbp` minus `tax_and_ni_accounted_gbp`, never estimated. `verdict` is exactly one of `full amount passed on`, `shortfall fully explained by tax and NI`, `unexplained deduction found`.
3. `deduction-classification.csv` with columns: `fee_line_description_verbatim`, `classification`. `classification` is exactly one of `income tax`, `national insurance`, `card processing fee`, `admin fee`, `float or till adjustment`, `unidentified`. Every classification other than `income tax` or `national insurance` is listed first in `gaps.md`.
4. `cash-tip-check.csv` with columns: `period`, `cash_tip_total_gbp`, `handling_method`, `deduction_found`. `handling_method` is `kept by workers directly` or `passed through business`. `deduction_found` is `yes` or `no`.
5. `gaps.md` - a numbered list of: every row in `deduction-classification.csv` not classed as tax or NI; every `worker-payment-match.csv` row verdict of `unexplained deduction found`; any cash tip row with `deduction_found` as `yes`; any statement line whose description is too vague to classify.

## Rules
- Codex counts, matches and classifies. It never decides whether a specific fee is lawful; it only reports whether it is income tax, National Insurance, or something else, and lets the something-else speak for itself against the rule that only tax and NI may reduce a qualifying tip.
- Never net a shortfall in one period against a surplus in another to produce a clean verdict.
- Every figure is taken from the supplied statement and payment records, never estimated or rounded until the final total.
- Use British English, GBP and DD Month YYYY dates. No em dashes in any file you write.
- Every file ends with this line: this is a working document prepared for the owner to check against their own processor statement and for their accountant or solicitor to check the tax treatment. It is not legal advice.

## Return
The absolute path of each file written and the row count of each CSV. The total gross card tips, total paid to workers, and total unexplained shortfall for the period. Every fee line classified as something other than tax or National Insurance, verbatim. The cash tip handling method and whether any deduction was found there. The `gaps.md` item count.