Ultra-compact and fast spinning turbomachinery is a key technology to increase performance of domestic heating applications and to address decentralization of power and heat as a consequence of the rise of renewable energy sources. Recently, a heat pump using a reduced-scale centrifugal compressor with an impeller diameter of 20 mm supported on gas bearings was tested successfully and higher system performance compared to commonly used positive displacement compressors was achieved. Nonetheless, due to the small feature size as well as manufacturing tolerances, the performance of such compressor systems is deteriorated compared to large-scale systems. The tip gap necessary to ensure a free spinning of the rotor on gas bearings is relatively large compared to industrial compressors. Unfortunately, limited experience about centrifugal compressors running on relative large clearance exists. This paper investigates the impact of tip leakage on the performance of centrifugal compressor systems for relative clearance ratios, ranging from 3 up to 15 %. The tip leakage analysis is conducted numerically on an experimentally validated centrifugal compressor system operating with refrigerant R134a. In order to investigate the behavior of the compressor by altering its clearance ratio, impellers with different blade heights are used to adjust the tip gap. The change in efficiency is investigated and empirical correlations available in literature are assessed. A new method to predict change in efficiency as function of relative clearance ratio is provided, thus extending current correlations to much higher relative clearance ratios.