The Supreme Court has handed down its judgment in BlueCrest Capital Management (UK) LLP v HMRC [2026], providing important guidance on the interpretation of the LLP salaried members rules.
Background
BlueCrest Capital Management (UK) LLP(“BlueCrest”), an investment management limited liability partnership (“LLP”), challenged HMRC’s position that many of its LLP members should be treated as employees for income tax and National Insurance Contribution (“NIC”) purposes. HMRC had issued assessments and NIC determinations totalling approximately £197 million in respect of the 2014–2019 tax years.
Under the salaried members rules, an LLP member will be treated as an employee if all three conditions introduced by section 74 of and Schedule 17 to the Finance Act 2014 are met:
- Condition A – Disguised Salary: remuneration resembles a salary or bonus rather than a genuine share of LLP profits.
- Condition B – Significant Influence: the member does not have significant influence over the affairs of the LLP.
- Condition C – Capital Contribution: the member’s capital contribution is less than 25% of their expected disguised salary.
BlueCrest argued that Conditions A and B were not satisfied.
The Supreme Court’s Judgment
The Supreme Court unanimously dismissed BlueCrest’s appeal meaning that the LLP has a potential tax bill of c. £197m depending on the outcome of the case, following remittance to the First-tier Tax Tribunal.
Condition A – Disguised Salary
BlueCrest argued that portfolio managers’ remuneration was linked to profits because discretionary allocations were calculated by reference to the profits generated by their individual portfolios and were subject to a cap linked to the LLP’s overall profits.
The Supreme Court rejected this argument. It held that the payments were calculated by reference to the performance of individual portfolios or desks rather than the overall profits or losses of the LLP. As a result, the payments constituted “disguised salary”; Condition A was therefore satisfied. This is because remuneration linked to an individual’s portfolio or desk is more akin to a performance-based bonus, rather than the overall profitability of the LLP. As such, it does not expose the individual to the broader risks and rewards of the business, such as increases or decreases in the LLP’s overall profits, and therefore resembles salary rather than a genuine partnership profit share.
Condition B – Significant Influence
The Supreme Court confirmed that “significant influence” must derive from a member’s formal legal rights and duties under the LLP’s governance structure. Influence arising from seniority, expertise, commercial importance or informal arrangements does not qualify.
The Supreme Court found that the First-tier Tax Tribunal had focused too heavily on practical influence and operational decision-making, rather than whether members had managerial or strategic influence derived from legally enforceable rights.
Accordingly, the issue of whether any of the relevant BlueCrest members satisfied Condition B has been remitted to the First-tier Tax Tribunal for reconsideration under the correct legal test.
As all three conditions introduced by section 74 of, and Schedule 17 to, the Finance Act 2014 must be satisfied, the full extent of BlueCrest’s tax liability remains uncertain.
Key Takeaways
- Performance-based pay may still be “disguised salary” – The decision makes clear that remuneration must be linked to an LLP’s overall profits and losses to fall outside Condition A. Payments based primarily on an individual’s own portfolio, department or performance are likely to be treated as disguised salary.
- Condition B is narrower than many expected – A member will only have “significant influence” if that influence stems from formal governance rights and responsibilities. Commercial importance and informal influence are not enough.
- LLP agreements matter – The judgment places significant emphasis on the LLP agreement and governance framework. LLPs now may wish to review their voting rights, management structures and delegated authorities when assessing salaried member status.
If you have any questions about the case, and how it might impact you or your business, please do not hesitate to reach out to our Tax Disputes and Investigations team.
