Service charge models

A service charge can recover a genuine operating cost, but it must be described accurately, displayed transparently and kept separate from optional tips. The business should also understand when a charge is treated as a qualifying tip for workers.

Define the purpose

Do not begin with the label. Decide whether the business is recovering payment, platform, packaging, small-order or another cost. If the charge applies to every order, consider whether the item prices should simply include it. A vague fee can damage trust and complicate refunds, VAT and staff communication.

Compare common models

Apply total-price transparency

Where a charge is mandatory, the customer should see a realistic total or clear calculation early enough to make an informed choice. Adding it only at the last checkout step is likely to be problematic. Optional charges must be genuinely optional and not require the customer to find a hidden removal control.

Understand tips and worker distribution

Where the employer has control or significant influence over qualifying tips, gratuities or service charges, current UK tipping rules may require fair and transparent allocation and full distribution to workers, subject to lawful deductions. Maintain a written policy where required and use current statutory guidance. Do not describe a business-retained mandatory fee as a worker tip.

Test accounting and refunds

• Confirm VAT and accounting treatment with an adviser.
• State whether the fee is refunded after cancellation or partial remedy.
• Reconcile gross charge, worker distribution and bank settlement.
• Test marketplace and direct-channel differences.
• Keep customer wording aligned with staff and accounting treatment.

Practical next step

List every checkout fee and classify it as item price, delivery, mandatory service, small-order charge or optional tip. Remove any label that does not match the actual destination and purpose of the money.

Document customer and worker treatment

The checkout description, receipt, staff policy and accounting treatment should tell the same story. If a charge is mandatory and retained by the business, do not suggest that it goes to workers. If it is distributed as a qualifying tip, maintain the required allocation process, records and worker communication.

Test edge cases

• Collection and delivery orders
• Partial refund and cancellation
• Promotion and loyalty redemption
• Split payment
• Marketplace order
• Multi-location settlement
• Customer removal of an optional amount

Review customer comprehension

Use support contacts, checkout abandonment and complaints to test whether the label is understood. A fee can be legally described yet still undermine trust if the purpose is vague or appears late. Simplify the total where possible.

Related guides

• Business Planning and Finance — the main guide for the wider topic.
• Pricing and Margin Management — the broader guide that frames this implementation.
• Pricing delivery to cover true costs — a closely related operational control to review alongside this page.
• Dynamic pricing for peak periods — a closely related operational control to review alongside this page.

Sources and date checked

Guidance checked: 24 July 2026. Recheck official guidance, local requirements and supplier documentation before changing a live operation.

• CMA: price transparency guidance
• GOV.UK: tips, gratuities and service charges
• GOV.UK: revised statutory tipping code